1/18 Recap. The Bull Market Never Materialized

We rejected right where I pointed out yesterday that the risk/reward was favorable to the bears. It wasn’t ideal as I was mostly positioned with short puts, but this morning when I saw it materializing I tweeted it out multiple times so people could understand the turnaround was coming. We closed below a lot of key averages and now, the market is firmly bearish. I closed out a lot of my short puts today and added a pretty large short position while still maintaining a lot of my short puts. I will go over all that at the bottom as I do everyday. For now, the data this morning shows the likelihood of a soft landing is low, the economy is truly in shambles, and we have a long, hard road ahead.

The SPY rejected that trend line for the umpteenth time today. It did yesterday as well and you can see the rejection last month, this has just been an impossible task for bulls. What got me to flip into buying puts in size today was the MACD rolling over as you see below, the RSI pointing south, combined with that huge candle rotating down. These moves are typically prolonged, now tomorrow, a lot could change with a big Netflix quarter and people back to panic buying the /NQ but today’s candle was very bad if you’re bullish.

The IWM put in a similar candle and is still technically broken out, but this was a very ugly reversal as well and doesn’t bode well going forward. Fear not, there are pockets of relative strength and I added to those as I will discuss below.

Today’s Unusual Options Activity & What Stood Out