Monday review

What a day - feels like we have not seen this much volatility in years.  Academics define volatility as risk, but I like to think of it as opportunity.  If you can take care of your downside, upside will take care of itself.  SPX opened at the highs (up about 1%), faded until 10am, then plunged on a huge ISM miss.  We hit lows down about 1% traded sideways for most of the day, then rallied to almost flat on the announcement that Boehner was holding a press conference at 3:30pm.  Optimism increased as Washington pundits declared the bill a done deal.

A few trading mistakes today:

1. Obviously I should have sold my FAS at the open - up about 4% for a quick gain.  Could have been done for the day.  At the open, however, I did not expect such an aggressive fade and big ISM miss.  Lightening up ahead of ISM would have been prudent.

2.  Revisiting my morning predictions, I did well calling the bottom in GLD.  I called a 156.80 bottom (actual low was 156.78), which it hit minutes into the open, then rallied 2 dollars as equities sold off.  I did not, however, stick to my plan to build a short position (via DZZ) at 157.90, mostly because of such aggressive buying.  It blasted through that point minutes after bottoming then subsequently rallied another dollar.  My hesitance cost me because DZZ proved to be lucrative as GLD closed below 157.90 on the day.  Such extreme volatility in gold may be evidence of a short term top, and I will be revisiting DZZ this week, especially on further dollar strength.

A few of my better plays today:

1.  At 12:35pm:

 







Ended up flipping FAS into the afternoon bounce, up about 1%.  Still hold a core position, which is down 2%.  Got out of TBT flat - but happy to not be in a massive hole on this one as it's nearing 52 wk lows.  Along with EUO, this is one of my favorite plays for the second half of the year. 

2. Core EUO position rallied about 2%.  I like holding this as a hedge - traders tend to rush into USD as a safe haven when equities are weak.  The real story behind Euro weakness was skittishness in Italy, with multiple banks down 5+% and some halted, not to mention CDS spreads blowing out.  In addition, I've been reading analysis which actually predicts ECB will lower rates, which will reverse the rush into Euros has investors looked for yield.

Tomorrow I'm looking for continued weakness of the Euro (and strength in USD) on the resolution of the debt deal.  Probably won't see such an optimistic open, but looking for a rally, especially in financials, intraday.  Will also revisit DZZ and TBT, but will do so cautiously because both gold and treasuries are trending higher.