$ES_F : 1545 - 1525 : Market Recap

Opex Madness - Do not fall in love with the upside (yet)

Trend change confirmed. Trading from bearish bias.

Today was April options expiry and markets reacted in some strange fashion. On one hand a healthy sign for bulls is that

  • Weekly trend change is not confirmed and markets managed to close above 1543 even though in the lower half of the weekly range.
  • Rally from 50 dma has been propelling markets higher. Each of those two rallies have been impressive and uncorrected before they are sold again. So far these corrective rallies look like making lower highs lower lows strengthening the case for bears.
However the volume on selling legs of the market is improving and any rally is building up protection buying. This is similar to situation which was prevalent in AAPL a while back before the sharp break started down. The current trend is short but it is a young and tender trend, it can be be broken easily if some determined bulls come to the party. I have started trading from the short side with caution. Here is a 5 minute chart of today's day session.

I came in the day cautiously bearish as per this trade plan. Once again markets were showing a small gap up which was expected to be filled and was my initial trade plan. Markets opened slightly strong and I went short at 1540 (first red arrow) expecting a move a gap fill which indeed happened and I exited 1536.75 second green arrow. Being opex day I was expecting a bounce higher and I was looking to sell my trade plan near expected day high. I took second short at 1544 third red arrow but market held VWAP support so I exited at 1543 forth red arrow. I should have removed my trade plan orders at this time but somehow they were left and were filled in quick succession fifth to eights red arrows from 1545-48. I was now in position but markets were looking strong however bit suspicious as TRIN was not confirming the strength of the market. It seemed volume was going in declining stocks as the markets were moving higher. In any case, the rally lasted too long for my comfort and I exited 50% of position at next test of VWAP at 1544.75 (9th green arrow) and the other half in quick succession at 1546 (tenth green arrow). Overall it was profitable day on short side even though the market was bullish.The trades and other updates are mentioned in comments here. My futures trading page based upon home work trade plan is here. I feel the rally from low is a bull trap and next wave of selling can begin next week in 1545-55 area.

It appears that markets are spending more time in the lower halves and under pressure. This is a confirmation signal for bears and hint that rallies need to be sold. Trend change on weekly bar is not confirmed but I would like to use 1555-1560 area as anchor for next round of shorts.

My stock portfolio is on short side with some minor long added on defensive stocks.