ES reversed to the upside after testing overnight low in the morning. The much better than expected new home sales report triggered the pop on top of testing 50 day EMA and BB low. ES closed above yesterday's high at CHVA. It's hard to tell if the double bottom or HS formation would work. Could it chop in the same range bound again?
Grains popped today on options expiration short covering and reaching some long term support areas. I sold some bear calls in all three majors and bought puts in wheat, no fill in corn and soybean. I finished my bull/bear ratio spreadsheet and it showed that I am still too heavy in bull puts. The ratio is more than 100% on bull side. Market is still in a very bearish mood. According to several sources on Agweb there are more downward price movement as harvesting progress. Corn and soybean are expected to go below $3 and $9 respectively. Wheat is not bottomed yet but I don't have a number. Based on my study of wheat's historical price chart it could go to low $4 as there are plenty supplies around the world. I am considering to exit half or all of my bull puts in wheat and soybean and take the losses and wait for the bottom settles. In the meantime I will enter the same numbers of puts in attempt of recovering part of my losses. The risk of getting margin calls are likely if I hold these positions through out the next down legs. The loss could get up to $50K initially but it's better than doubling it which could be devastating. I will calculate the scenario to see how much cash I need to cover half and all of my positions.
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