Friday the S&P 500 ended lower for the 9th straight day, the longest losing streak since December of 1980! When the market is moving in such unusual ways, it is not surprising that we’ve been getting whipped around in our trading over these past 9 days. We ended the week with -7% total in our SPX day trading and +16% in our SPY day trading. Our market indicators and forecasts are based upon the way the market historically acts. Anytime we get a period of unusual activity, our indicators are more susceptible to being wrong. The elections are coming up, and certainly that is influencing the markets. We would expect there to be a return to normal activity after the elections settle out. But until then, we will continue to trade each day. Because we know that the only way to make up for the draw downs is to be trading when we hit a home run. In the past when we’ve experienced these periods of back and forth, we normally see some very nice returns shortly after. So we are hoping that will be the case once again over this next month ahead. So we stay on this roller coaster ride and get prepared for what is coming next.
Don’t let a triple digit gain turn into a loser
In our trading this week, Friday is a good example to look at. Because we forecast a down day, but it rallied first thing. So this was a morning where we delayed our entry. As noted in this chart, we delayed entry until 9:40 because it was clearly going in the opposite direction of our forecast. Then it began to fall fast, hitting 106% and our target was around the 120% range. As a general rule of thumb, if our position has hit around the 100% mark, we will at least pull our stop up to around the break even level. Which is why we then exited our position a few moments later in the very strong bounce back up. The same basic approach is why we exited where we did on our SPY option as well.
Day trading requires very fast response and every day is unique. We do our best to not let a triple digit gain turn into a loser, and that is why we exited where we did. One could have certainly exited earlier and locked in greater profit. But because it was not yet close to our target level on the SPX, we were willing to wait to see if the drop would continue. When it didn’t we exited the position.
This next week is certainly going to be another wild ride with the elections. We plan to share a special Election Day trading technique with our subscribers during the day on Tuesday. So keep an eye out for a additional Election update during the day on Tuesday for those looking for an extra trade that has the potential of being extremely profitable. Have a great week day trading SPX and SPY weekly options!