IS IT STARTING?

After being up for much of the day, the markets slid into the close. All three averages were down over 1%. I received a few emails asking if the expected downtrend was underway. The answer is that it's hard to tell. The volume was very light again...something you would expect going into the Labor Day weekend. The VIX didn't move up much which is also a result of the light volume. If this isn't the start of the decline, I still think that it is close. We might have an average day tomorrow as we go into the holiday weekend. If so, we'd likely see the selling begin sometime next week. If any unusual bad news comes out tomorrow, we might see the selling start sooner. As I said last night, there is still room for the markets to rally a bit more. If we saw a big rally, it might concern me a bit...although I'd consider the possibility of it being a capitulation of this latest counter trend move. Those that traded puts on NFLX from my recommendation on Monday will likely wake up to a nice profit. NFLX was down $20 in after hours trading due to Starz ending it's contract negotiations. Am I psychic? No. I just used some Elliott Wave analysis combined with some basic Trend Analysis...combined with a bit of luck. I was expecting a move down of this size...just not all in one day. That was the "lucky" part. The FAZ could be the next big mover. It had a strong move up into the close. There is still time to get into that trade. Don't bet the house on it. Use sound money management and trade management. The reward to risk looks fantastic. Remember that the FAZ is an inverse leveraged ETF on the financial index. This means that the FAZ will go up if the financial index goes down. This is why I'm recommending calls on the FAZ. It is also a leveraged ETF (3 times) which means that if the financial index goes down a dollar, the FAZ will go up three dollars. If the price of the FAZ options are too high, you could look at using an out-of-the-money debit spread to reduce the cost. This will cap your gains, but you could still make over 100%. The debit spread is a strategy I teach in Course 2. If you want to learn it, take some of your profits from this next move down and invest in that education. Email me if you are interested (jerry@myoptionmagic.com).