The Big Picture This past week we took initial short positions (October 17th calls in SQQQ and UVXY) in anticipation of a downside move in the market indices. Despite modest declines mid-week, the market had a strong Friday soothing some fears that an anticipated cycle low was beginning to take shape. In EW terms, its labeled as a Wave 2 countertrend rally, a false "all clear," that always, always occurs just in front of the worst part of the unfolding decline. The next few trading sessions should erase any doubt as to the markets true intentions. If its more downside to come, it could get nasty, in which case I will recommend new short positions. In fact, I will do so today, if key levels on the charts below get taken out. DJIA Daily Looks pretty innocuous, eh? Price sitting right on trend line support, or an extremely bearish wedge. Let's dive a little deeper. DJIA - Hourly A different, much more bearish pattern emerges as we drill down on this hourly chart. Note how Friday's fits the bill perfectly for a Wave 2 rally. Next week should make or break this analysis, certainly by Tuesday. QQQ - Daily We saw the above QQQ Daily chart late Friday. Now let's look at the Hourly version: QQQ - Hourly Let's make this clear: Any QQQ print below $590 is a trigger to increase short exposure to the Nasdaq, either by doubling up on current October 17th positions, or alternatively, going out to November 21st expiration as below: SQQQ - Hourly Thursday's high print = $16.13 SQQQ - Nov $16C A deep dive in Nasdaq should take SQQQ into the high teens to low $20's, giving these November calls 5X+ potential. Thursday's high print = $1.68 Summary The bearish analysis set out in the above DJIA and QQQ Hourly charts presents the most compelling opportunity on the board right now, more so than Gold and Silver, more so then TSLA. If it plays out as shown, it also stands to create sizable option returns, whether October or November expiration. If next week passes without a breakdown, we can go back to cherry picking individual stocks and select ETF's on the long side. For now, all eyes on the indices taking out last Thursday's lows, as well as trailing stops, if any, on existing longs. Best Performers -Premium Service Best Performers - PRO Service All Active Trades PRO Service Premium Service
