Trump just wanted to save me!

It almost like Trump just wanted to save me from further getting eggs on my face😂😏 You see, I have been talking about a potential severe correction for quite some time but the market has kept going up. Apparently Trump cannot let it continue and therefore has "manufactured" a mini crash  by announcing the tariff hike to scare the market down! It works. Thanks, my friend!!


Joking aside, here was the note I posted to my group last Sunday evening (May 5) following Trump's unexpected Tweet on the tariff hikes for China.


"Interesting I'm viewed as bearish. In a way, yes, I'm very bearish for the time being but probably not the bearishness as perceived. Remember I called S&P500 all time highs this year to 3000/20% at the very last day of 2018? (See my blog "A 20% jump in 2019").  I could be called stupidly bullish when virtually the whole world was crying and panic for more crashes to come. Not me at that time. So I'm not bearish at all and actually I'm still very bullish for an ultimate Melt-Up phase to come before this decade long bull is finally over. But I don't believe this MU phase will come in the current sentiment with a straight line up V shape recovery from the Dec crash. You can say I have been wrong by now since I honestly didn't expect a new high straightly from the Dec bottom, even though I was among the very few, if any others back then, calling for new highs this year. But still, I don't believe this new highs are sustainable with the current sentiment. 

Now with Trump's sudden threat for new tariff hike to China, will the market "crash" from here? I don't know. We have seen how resilient the market has been in the past few months and we may very well see the attempt for continuing the resilience for a while at least. In other words, it is possible we will see a quite harsh selloff tomorrow and probably for a few days, but the attempt to rebound for new highs may still come thereafter. However, I do believe, any such attempt may very well fail eventually and I won't be surprised to see a 10+% correction before this mood-adjustment is done. Without that, I will continue to doubt the sustainability of the new highs and whether a truly blow-off Melt-Up will come."

And my note on May 7:

Bulls are out of luck today. I thought they would mount another bounce back by closing but they couldn't. Now S&P has clearly broken down from its important support, which will open the door for more downside risk in the weeks ahead. Of course, it won't be a straight line down and we will still see many bottom fishing attempts to push stocks up in between. But I feel more confident to say the current 4 month rally is likely coming to its end. Any attempt to recover to new highs will likely fail in the near future. A more sustainable new highs will only come after a more sizable correction. I have seen 15-20% correction estimate from some savvy traders.  You don't need to believe me and you can still chase highs from here but just be prepared for a real "crash" that could come in the weeks ahead.

About a week ago I told you guys that we had seen historically high volume of short bets for VIX when it was around 12. This was usually the time VIX would jump quickly. History has again proven to be smart. VIX has jumped almost 50% within days. If I'm correct about the more downside risk, then we will likely see more volatility with VIX to jump around. Again be careful during this time and don't risk anything you cannot lose! Although my timing was not perfect, I'm happy to cash in now from my long VIX bets and I'm actually expecting some good rebound soon as a dead cat bounce within a week or so. This is just part of my swing trades for up or down based on TA.

Well, it's too early to say if the market has clearly entered a correction mood as I could be wrong again with the market just shaking off the scare in the past week and marching to new highs again. But I continue to bet, even if we see new highs, it won't be sustainable and we will see more selloffs in the weeks ahead. An expectation of 15-20% correction from the top by some very savvy traders should not be scorned off, at least not by me!




In this kind of volatile market, swing trading is one way many traders are using but it requires strong TA skills to precisely spot good resistance and support levels on a timely fashion. Another good strategy is to bet some stocks will be more range bounded, i.e. not going down or up too much but within a limit defined by upper and lower band. Iron Condors or more aggressively Short Strangle is a good option strategy for this trading. The beauty of this strategy is that you don't need to know precisely where the stock price will land during a period of time, as long as it is within the range you define. For example, in the past month, I was betting Amazon would not go below 1650 or go beyond 2050. Anything in between would be my max gain with the iron condors I put in place. I have another week to go till May 17 for expiration but it looks quite likely this will be the case for Amazon! 


Following my post Thu night to bet for a rebound, the Market  responded with a sharp plummet to start on Friday. Market God never makes traders life easy. I bet not many people were actually buying yesterday when in a good part of the day it was selling hard. It really needs strong resolve and belief to buy in such a day. But at least I hope the decisive turnaround by end of the day was not a big surprise to you. I believed it and I did buy more yesterday! The best trade is shorting VIX. If you pay attention, you may notice even at the time the market seemed to fall apart again, VIX didn't budge too much. Relatively speaking, VIX didn't show panic too much when the market's wheel seemed to fall off again. This is another angle to suggest a big turnaround was coming. It did at last yesterday! Watch for more rebound next week, barring any big negative surprises over the weekend of course.