As I write this on Sunday evening the futures have opened slightly stronger. This is a reaction to nothing really horribly worse happening on the world stage, and that causes some shorts from Friday to cover their positions. If the market can open the New York session a bit stronger then Friday’s close then I expect that strength could carry the market through the early part of the week. However Friday DID cause me to exit my longs. I exited the JPM call options at a tad better then 100% gain and the DKNG call options at a 14% loss. The action Friday had too much overlap with previous price action in the broad market and particularly in DKNG. It is simple — trends do not have a lot of overlapping price action and chop and slop markets do have a lot of overlapping price action. So I had to modify my characterization that the market was in a bull trend based on the information the market continuously provides. DKNG just simply retraced too much after starting with much promise after my initial entry. JPM though, more than made at the open up for it putting in a very strong performance. Additionally I added a short position in IBM on Friday (chart attached).

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The reason is that IBM’s relative strength to the market, which had been very good, has really slipped the last 2 or 3 weeks. Then on Friday it gapped lower even though the broad market gapped higher. I don’t know what fundamentally changed with IBM, but I do know the price action is not bullish at all. So I am long IBM puts with an expiry at the end of November. Regardless of whether the market can hold up early in the week, I think at some point next week we will take out last week’s low, and that it will likely be by a decent amount … by that I mean at least 100 SPX points or targeting around 4291 in the SPX index. I will be looking to exit my IBM puts if and when that weakness shows up.  

Thanks,

Joe