And the verdict is............

Pretty bad session for the bulls (me included). It was a stinker every way you look at it. Cumlative ticks finished at -140,000, volume surged well above the 30 day average, breadth was terrible coming in at about 30 to 1 negative, yup that's not an error, that is a shocking number folks. A/D lines were just as bad with sub minus 2000 readings on both the NYSE and Nasdaq. I haven't worked out what the skew is but if skew didn't go up too much then that would be a victory for the bulls as it tells me that the selling whilst bad was expected or orderly unlike the type of panic selling that occurs when something unexpected comes up. Remember the VIX did go up on Monday along with the market so that in itself tells you that some of the smart money was already hedging bets (usually a bearish sign according to my quants).

Needless to say, all my positions got absolutely smoked last night. The NDX position right off the get go was down 50% on a cost basis due to the large gap (ah the perils of holding overnight positions in this market) and this was after I was up 10% at the close of yesterday! This is bad and as bad as it was, sometimes there is nothing to do in that situation except not to panic and wait for the reversal. I made some adjustments to it with the advice of Mark but the position is on life support barring a 2% rally before next week's expiration. I will post a risk graph of it tonight.

The other trade is the OEX BWB and early on in the session, I made the decision to double down and hedge the position by buying more of the BWB with strikes further down (500/495/485). What this does is increase my expiration breakeven but adds more deltas, short vega and long theta to the position. So ideally I need the market to hold at these levels or if it sells off a bit more proceeded by some kind of bounce at the end of it. The lucky thing is is that I have some time on my hands for this to eventuate unlike if I was in the weekly options that expire this Friday (there would be very few options left but to get out).

The final trade is the iron condor on the long bond ZB. That position is also on fire as in going down in flames with the long bond now slightly past the short strike calls at 131 (oh how I regret to go against my long term view that bonds were a good long play). I am doing nothing at the moment on this position either until it reverses somewhat before adjusting (if I do). This is the same as the NDX position, what I've learnt over the years is that adjustments shouldn't be made at the worst time (emotional pain is the highest but when things are calmer). If I had traded based on my emotions, I would no longer be here. It takes a bit of a iron stomach to trade like this but that is my trading philosophy and plan and I'm sticking to it. Remember the market doesn't pay you for being comfortable but for when you are very uncomfortable as many times it's the contrarians type of approach that pays off.

So what next? Well, as bad as it was, I think I've seen this movie before. ie market rallies and then sells off very hard over 2 or 3 days before it bottoms and then rebounds sharply. I think in the very short term we probably will bounce here. However, in the intermediate term context, it does call into question of whether we will get higher prices. This market has such a short term memory it wouldn't surprise me but then again you never know. Overall it would appear that the wide range trading scenario is playing out nicely ie support at 1010 and resistance at 1120 on the SPX. We shall see........