Trade Ideas for 10/22/09

A volatile day as the S&P opened with a slight gap down, made new recovery highs in short order, only to break through levels of key short-term support (yesterday and Friday's lows) by the close. The move up from the early October low appears to be over, with the possibility that the move from March is done as well. With potential capitulation in the dollar and the VIX, both of which crashed to new 52-week lows today before reversing (and in the case of the VIX, sharply so), the elements for an enduring decline are in place. A good confirmation would be a gap down tomorrow that doesn't get filled (indicating a stampede toward the exit). Anything less, and you probably can't count this market out. Since July, it's made a sport of snatching victory from the jaws of defeat.

Structurally speaking, I interpret the price channel of the past two weeks as a Wave 3 of great length. Once it broke down yesterday, the S&P completed Waves 4 and 5 in under 48 hours. Both of these waves were extremely short in duration and length, making it a great one-two punch fooling both bears and bulls:

As for our holdings, we sold the other half of SSO today, for a combined return of 3.84R. We bought and sold CHS for a whipsaw loss. And finally, we bought SKF. It traveled below the sell-stop early on, but since the difference was less than 2%, it avoided being scratched, and the low of the day becomes the new sell-stop.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Addl Exit Guideline	Chart
SKF	24.37	24.77	+1.6%	23.32	Consider booking some (maybe 20%) profit around the 50-day moving average (26)	Chart
AONE	24.31	24.33	+0.0%	23.22	N/A	Chart
TWM	27.58	28.11	+1.9%	26.43	Consider booking some (maybe 20%) profit around the 50-day moving average (30)	Chart

Looking to add to short positions, plus DGP. In the event of market recovery, I'd suspect dollar weakness, and gold seems to be more sensitive than the market to the dollar. Any shorts that are elected, consider booking some profit around the 50-day moving average.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
DGP (Gold Double Long ETN)	25.69	24.97	N/A	Chart
SRS (Ultrashort Real Estate)	10.07	9.38	N/A	Chart
DUG (Ultrashort Oil & Gas)	12.33	11.49	N/A	Chart
EEV (Ultrashort Emerging Markets)	12.42	11.67	N/A	Chart
ZSL (Ultrashort Silver)	4.92	4.61	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.