QUICK THOUGHTS
I made no changes to the portfolio whatsoever today. I remain long (short ETFs) SQQQ, TZA and FAZ.
Today marked a significant breakdown. What is more important is that the breakdowns in a majority of the major averages occurred from the exact structural levels where they were supposed to hit the proverbial brick wall. When markets respond to bearish price structure with such enthusiasm, it heavily increases the odds that the move is indeed real and will likely continue over the short term.
Although we may see some strength in the morning as dip buyers attempt to step in, I don't think it will be significant. Keep in mind, there remains a lack of short exposure amongst major institutions currently. In order to build that up they may be forced to chase an illiquid market down. Unless we blow away today's down move and rocket to the upside over the next few days, money managers will begin turning into net sellers over the short-term. Offense will turn to defense. The markets will suffer.
My thesis with this short trade is that the markets will pull back deeper than most expect and begin the classic Christmas rally at a later date than most expect. The 20th-21st seems to be a logical date for the bulls to begin a run. Perhaps even later. It really depends on how the market transpires into next week.
I'll have some detailed charts outlining everything I am observing this weekend.
