A question was put forward by a client: Why are you not just buying the SOX index with a tight stop?

Answer: I am not chasing… I prefer chart pattern confirmation. I already have long equities via the short bonds!

Reasoning and review of recent trades…

We were short the equities from last Thursday and took off the remaining big piece Tuesday early A.M. This brought our position down to 25% of the original chunk, which we let ride just to see if we were right.

This way you let the market tell you if you are right or wrong…saves a lot of brain damage.

Tuesday we sold the 30 Yr. Bonds off the double top multi year high of 142.28 (SEP).

Now to SPU/BONDS…this is the Long Stocks/ Short 30 yr Bond spread. Based off this I now have 2 opposing positions, however I am heavily weighted to the short Bond side which is Bullish the spread.

We made big money on the equity shorts and have a free look on the residual position. We made around 2 full Bond points off our original sells in the 30 Yr. Futures just trading the Chart pattern!

Now, whatever happens, we do not lose! One side is going to be really right and I don’t have to think about which one it is.

Kudos to Charles Nenner for calling for a major high in the 30 yr. Bonds for Sept. almost a year ago. This got me looking for a pattern change, however it is still way too early to know if that was the top. Given that the risk was 6 ticks when I took the shot, Why Not? I trade when I can codify the risk!

I took my shot at the Chart Pattern with almost no risk. Time will tell which look is correct.

For all you thinkers out there, will a turn in the Yields ( if this is the turn) create a further rush to Dollars?