March saw our trading portfolios amass large trading model gains, followed by getting stopped out of half on almost each position, only to then see the remaining positions spike again. Those positions took another hit as the Dow rallied 1,000+ points in the first few days of April, which was all but forgotten with Friday's 572 point decline. Next stop the February 9th - April 2nd lows around 23,350. As the Dow chart below indicates, the current target window for Wave 5 is between 22,000 and 23,000. In other words, if this fifth waves plays out as is shown the February 9th-April 2nd lows will be toast. Then down, down, down it goes.
(1) If the Dow takes out 23,350, the area of twice tested lows in February and April, it's all-in on the short-side. Initiate and/or add to Short positions, the stock market is going hard down.
(2) At their highest price since entry the Apr $275 puts were up over 200%. They hit their trailing stop at up a little over 100% and closed Friday up 130%. With April having just two weeks to go, get ready to switch over to May sometime over the next week to 10 days.
If entering new, or adding to SPY puts, my choice are the SPY May at-the-money puts, which as of the close on Friday were the May $260's trading about $6.25-6.30. If the market gaps down, go with whatever strike is nearest the price of SPY at the time.
(3) VXX: The Special Situations Portfolio is still holding the Apr $45 calls. This is a much more speculative and risky model than the DJIA/SPY model above, but it also offers spectacular gains for a market meltdown. Any new positions should focus on either the April $50 or May $50 calls, the former a little more speculative and risky than the latter as they only have two weeks until expiration. For VXX calls we are willing to go a strike out of the money for the extra leverage.
Best looking trades for adding to or initiating new positions (In no particular order):
Even this "Bullish" long term wave count is expecting 1,000 points lower.
Monday will be an important day for the market. Although the probabilities are weighted to a downside resolution, on Wall Street there ain't no such thing as a free lunch (Law of TANSTAAFL). To use a baseball analogy, we are taking another swing at a big, fat, fast ball down the middle. If it's a curve, a slider, or a change-up, it's strike one...or two if you're counting. In my version of this great American game of chance, there is no such thing as a strike three.