The Stock Index Portfolio 26 hit new equity peaks today shorting the market while the stock indexes had one of their worse days of the year on one of the best bull trap setups I have seen in awhile.
The 200K Portfolio was up $5,700 while the 50K Portfolio was up $1,200 on the day with 7 of 10 Nasdaq strategies showing profits on the day and 2 of 3 S&P strategies with profits.
The bulls ran the market up ahead of CPI in anticipation of a better than expected inflation report. The headline number was 8.3% versus 8.0% expected. The number was worse than expected and the market spent most of the day giving back all of the post Labor Day rally with the shorts causing the longs to sell.
The bullish idea of getting ahead of the Fed's pivot (back on June 16, 2022) because inflation has peaked was misguided since inflation is stickier than expected. The thesis of a Fed pivot that generated the June 16 lows is in jeopardy as are those June 16 lows. The market felt very "flash crashy" in the order book towards the end of the day right before some dip buying came in as we slowly covered most of our shorts, hitting profit targets on the way down.
The last two CPI reports have been a challenge for slippage and commission and rejected orders. We missed a 60M Breakout Short S&P trade that hit a 20 point profit target in the fast market during CPI with an exchanged rejected order based on the speed of the market. This is $1000 per E-mini in missed profits
Last month, during the CPI release, the Micro Nasdaq traded 55 points lower than the E-mini and was stopped out while the E-Mini Nasdaq was not stopped out and hit its profit target. The difference was a $1400 stop loss versus a $1500 profit target per E-mini. A similar move happened this month. The Micro Nasdaq was 0.75 points away from its profit target this morning before it rolled over, hitting its stop for a loss and we had slippage on a number of contracts between 60 and 130 points. What made this scenario even tougher was the E-Mini Nasdaq traded 11 points higher than the Micro on the breaking news and hit its profit target.
So instead of a 1500 gain, there was a 1400 loss (one again, same as last month) in addition to 2000 in slippage per e-mini. There was at least $6k in missed profits and deviation from our trading system signals on an E-mini basis ($2.4k in the 200K Portfolio and $600 in the 50K Portfolio) between these two strategies.
Approximately half of the trend was overnight. Employing strategies that can capture the overnight or pre-market trends is the reason why we have these two strategies: 60M Breakout Short ES and 60M Breakout NQ 2020 MS7 in our portfolio. We want to be able to capture moves on days where the only trend is in the pre-market or overnight.
Today we had a classical sell off with a continuation into the close and our day trade strategies did well.
Often times there is mean reversion on the results. The next sequence of trades could see the Micro hit its profit target on the overshoot or the E-Mini hit a stop loss on an overshoot.
While the worse case scenario unfolded for our pre-market strategies, and our implementation to the signals was extremely far off, at the end of the day, we are at equity peaks in a very sloppy and difficult market.
Tick Reversal hit equity peaks today with two nicely timed short trades.
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