Wheeeee, the Nikkei is down 5% today.
That's now down 14% off the top but a 20% retrace of an 85% run is 17% so, ugly as it seems – so what? Wake us up when there's a real correction. Another 3% down from here (14,000) is 13,580 so THAT's the line we'll be interested in seeing and, guess what, that's right where the /NKD futures bounced last night – gotta love that 5% Rule!
That same 5% Rule told us yesterday that SPY would re-test the 165 line and, lo and behold, they finished the day at 165.22. It was RUT 975 of bust and 980 was the low of the day so we maintained a generally bullish attitude, despite the intra-day dip. This morning we remain nimble as we played Oil (/CL) and Gasoline (/RB) Futures from both sides of the line in early morning Member Chat and had small winners in both directions.
We don't have much of an inflection point until the Dow tests 15,200 again (the bottom of Dave Fry's rising channel and our perfectly predicted -5% line) and, anything below that is a strong signal to get your bear on.
We're already using DIA puts to protect our Income Portfolio (June $148 puts, now .60) and we also have a few June TZA $39 calls but those are trashed at .32 with TZA at $31.38 but we can pick up the October $30/37 bull call spread for $1.90 and, since we have the long $39 calls, we can sell some June $36 calls for .60 to lower our cost to net $1.30 on the new spread and we can't lose more than $3 to the upside and our long spread would be $7 in the money if that happens so a good adjustment to make in our Income Portfolio.
On the DIA puts, we "invest" another $10,000 in insurance and roll the puts (100) to the Aug $147 puts ($2.25), which is net $1.65 and we then need to find some DIA puts to sell for that .65 so it's the June $149 puts at .80, which means we're spending net .85 on the roll to the new spread.