Small Cap Slingshot

Another tough battle last week in the PowerShares QQQ Trust (NASDAQ: QQQQ) which closed up 0.07%. The important point was that the bears were able to successfully defend the $46 level against an option-fueled bull charge. Based on last week's action, I expect to see the QQQQ begin to fall towards a test and eventual break of the March low.

If you are not already substantially short and there is mild strength on Monday, I would take a position then. I am staying away from the small cap stocks for the time being, even for shorting opportunities.

Good luck trading and see you Wednesday.

So the PowerShares QQQ Trust (NASDAQ: QQQQ) put in a big rally today, and smacked my option puts down. I was semi-prepared for this rally, as I thought that there was an outside chance that the QQQQ could run up to $45. However, today's close broke that level, and has brought the $46 resistance level into play.

While it is never fun to be wrong, it is a part of being a trader in the stock market. And although my timing signals are sometimes perfect (like buying lots of puts at the beginning of June), sometimes they are off (read the previous posts' title). After a day like today, I reevaluate my position and reassess the situation. I am fine with my current position, and I am extremely curious how this week will end.

I am posting this quick bite early in the day so my readers can follow me if they wish and take advantage of the current situation.

If the PowerShares QQQ Trust (NASDAQ: QQQQ) closes above $44.23 today, purchase all the puts you can handle. My portfolio will be slightly more than 50% invested in various QQQQ option puts.

Wow! Last week was an insane battle. But with the PowerShares QQQ Trust (NASDAQ: QQQQ) closing at a new low (over the past two weeks), I think the bulls are done and there is some significant downside coming just around the corner. Yes, there may be one more rally day (to the $46 level?), but I would consider that a gift to get aggressively short. My downside target is below the QQQQ March lows and that is why I bought a handful of September 38 option puts at the close on Friday.

Two stocks I will be watching this week will be Oil Services HOLDRs (AMEX: OIH) and Potash Corp. Saskatch, Inc. (NYSE: POT). These stocks may rally this coming week, and if they do, I will look to get short assuming new highs are not reached.

Remember that this week is options expiration so things could be extra wild. Good luck trading and see you Wednesday!