Just when we thought things were back on schedule to five-day trading weeks, tomorrow is another market holiday, closed in honor of Jimmy Carter, while Jan 20th the market is closed for Martin Luther King Jr Day. As for February, don't ask, lets first see who or what else might kick the bucket and/or spook the market. Speaking of which, note that all of our great long picks from the 3rd and 4th quarter of 2024 have dropped and most have triggered their respective 50% trailing stops, locking in excellent gains on at least half if not all of the positions (as per individual preference.) Back to current business: Patterns continue to suggest that stock indices remain on the precipice of a steep decline. As painful as the new year has been, the worst of it is likely ahead. Let's review three key indices: DJI The same analysis applies to all three of these indices. The beginning of a five wave impulsive leg down is unfolding across the board, DJI, S&P 500 and Nasdaq. I could have also thrown in IWM and NYA, but its not helpful, they all sport the same first and second waves and appear to be on the brink of third waves down at multiple degrees of trend. There is no guarantee of a hard down few weeks (or months) ahead, we have been wrong before. Nonetheless, when everything we follow is pointing in one direction, the only questions are when and how to best leverage the move. No one knows exactly when, as it could be at any time and triggered by any one thing or nothing in particular. As for leverage, SQQQ calls fit the bill nicely and I am now looking at Feb Monthly expiration with 44 days left for the best balance of time versus leverage. SPY QQQ SQQQ Feb Monthly Calls Caveat As with any downtrend, there will be counter-trend rallies along the way. They will be steep, a-b-c in nature (three legs) and over before you know it. Look for any day that starts strong, reverses by mid-session and then closes at or on the lows of the day as the signal to go all in on the short-side (long SQQQ calls). Premium Options Performance Table Note: Shaded rows signify positions that are subject to exit triggered by 50% trailing stops
