Tumblin’ Tuesday – Thursday and Friday’s Low-Volume Gains Erased at the Open

You can't say we didn't tell you so.  

In Friday's report I said: "We're now only 5% below the "obviously overbought" market top.  What changed in the past 7 days?…  The reason I'm skeptical of the rally is that we've bounced back on 1/3 the volume at which we sold off and forming a weak base is why we were shorting the market in the first place a few weaks ago.  Apparently, traders have learned nothing at all this month and we're right back to the madness of the Dow moving up 1,500 points on ridiculously low volume.  This is simply a lack of sellers at the moment and God help us all if they come back!"  Fortunately, we also followed through with our hedges and went into the weekend with a bearish tilt to our portfolios – locking in last week's silly gains.

Even better, of course, were the Futures Trade Ideas we featured in Friday morning's Report, in which I said:  "As I noted in yesterday's Report, we amped up our hedges into the weekend and, this morning, I put out a note to our Members saying":

/YM is 25,300, that's my favorite short and we have /ES 2,740, /NQ 6,845 and /TF1,545 and my stop-outs are if we get over 2,750, 6,850 or 1,550 but, otherwise, I want to accumulate /YM shorts.  

As you can see, we already had a nice $4,385 gain on the /YM shorts by 1:15 on Friday – not bad for 4 hours' work!  After that we were able to rely on our index hedges to protect us and, into the close, we addred the following trade idea for the Russell Ultra-Short (TZA):

I'd go TZA July $11 ($2)/15 (0.90) for $1.10 you get $5 in protection and it's almost $1 in the money to start.  

TZA closed Friday at $11.84 and is should still be a playable hedge this morning if you think your portfolio is too vunerable.  A $3.14 gain in TZA would be 26% and, since TZA is a 3x short for the Russell, that would mean a 9% dip in the Russell should correspond to…
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