Splash Zone Weekly Wrap Up: 2/14/16

Considering the market had another down week where it finished 0.8% lower, and prior to Friday’s rally it was down 2.8%. Finishing the week in the green in the Splash Zone is always a plus in these types of market environments. Furthermore the insane pre-market moves that are unfolding well before the opening bell makes it very difficult for getting in at optimal prices on trades. Consider that nearly every day last week saw a premarket open of over 10 points, and 4 of the 5 days had gap up/downs of +20 points and of course heading into the open on Tuesday, we are looking at more of the same. 

Managing risk has to remain our first and foremost priority. We are navigating the markets well here in February, and I expect that to obviously continue. Risk stays tight so that if we have a stock that stops out that it isn’t debilitating. Since The Thursday’s lows, SPX has made about a 80-90 point move by the time the the equity markets open which represents only a little more than one full-day of trading. That just goes to show how aggressive you have to be in taking profits when you are shorting the market. The speed at which this market is operating at, is not for the faint of heart. 

But it also goes to show that unless you were willing to suffer through last week’s downturn by holding long positions, you really couldn’t have taken advantage of the rally that was seen on Friday afternoon and continuing into this week. That can be very frustrating for traders who watch price movements day-to-day, but you can’t chase price. More times than not, the patient trader will see price comeback to a place where the risk/reward is favorable and that is what must be done here. 

We closed out SPXS and GS for solid gains and opened closed JPM for a nice gain as well. Let’s continue making more trades like that this week, while keeping any losing trades to a minimum and small, which is something we have been able to do very well here in February so far. 

The ideal scenario this week would be to see the market flush out and push below 1800’s, and actually put in a legitimate bottom for this market to start trading from. At this point, I think it is absolutely necessary to be skeptical of strength in the market, but not necessarily stand in front of a locomotive of intraday strength with a basket full of shorts hoping that the market will stop on a dime. 

We will have our work cut out for us this shortened week and I am excited about the opportunities that will come our way.