Welcome raviraj75! That’s a good question. Although I’ll often use the term “full position”, a full position doesn’t mean 100% of my portfolio, just the amount that I plan to allocate to a certain position, such as index longs or short, gold, bonds, a certain commodity or individual stock, etc. While I can’t give individual investment advice, I can say that it is generally poor risk management to put 100% of one’s portfolio into a single position.

As of Friday’s close I have about 70% or so of what might be a full short position on the indexes, with some room to add, depending on how the charts develop going forward. Even a ‘full position’ is a rough proportion to my account at any one time as sometimes I will increase to what I refer to as an overweighted position on a trade, if my confidence on the move & other factors warrant it.

Bottom line, right now the QQQ short trade is an aggressive, counter-trend trade so for most (but that depends on each individual, including their risk-tolerance & how aggressive they are or aren’t) it would probably be best to not go too heavy on any index shorts until & unless we start to see some developments in the charts that indicate that the market will most likely be heading much lower & that the recent bounce was most likely a counter-trend rally that has run its course.

One such example might be some very impulsive selling next week that take prices on the indexes & many market-leading key stocks back down below significant levels that were breakouts last week. A specific example of that might be the INTC active long trade. INTC was added as a long swing trade recently after breaking about above the bullish falling wedge pattern on the 60-min chart below. From there, the stock consolidated in a sideways trading range, forming a basing pattern bounded by a resistance zone around the 44.75-44.10ish levels.

In a recent update, I had pointed out that trading range, stating that a break above it would most likely be the catayst for a quick rally up to the first price target. INTC made an impulsive breakout above that trading range on Friday & did indeed rally up to hit the first target that same day. Resistance, once broken, becomes support so at this point, any pullback in INTC “should” be contained by that former resistance, now support zone. Should the stock fall much below the 44.75 level & especially back down below the recent lows, that would indicate that Friday’s breakout was a false breakout, aka a “bull trap”, which is a bearish technical event. That would likely indicate that INTC has more downside to come.

Same holds true for the major indexes as the resistance levels that were recently taken out “should” contain any pullbacks but if/as each level goes, especially with conviction, and especially the recent lows from Monday of last week, that increases the odds that the recent rally was just an oversold rally within a much larger correction with more downside to come.

RSI divergence on the daily chart most certainly helps to confirm the case for a short swing trade & even a longer-term trend trade, no argument there but a large part of what is formulating my intermediate-term outlook is are the bearish technical developments on the more significant weekly charts, including but far from limited to the very larger & very clear divergences on most of the momentum indicators, including the RSI & PPO on all the major large-cap indices (SPY, QQQ, IWM, etc..). That helps to formulate the bigger picture with the timing of this next short entry based largely on the 60-minute charts.

Also, divergence in itself is not a buy signal. I was highlighting the RSI divergence that was forming on both QQQ & SPY heading into the Dec lows (and expecting it to most likely play out for a sharp rally) and most recently, highlighting the recent RSI divergence on SPY several times over the past couple of weeks while starting the likelihood a sharp bounce based on that as well the 60-min RSI & PPO divergences, oversold conditions & more.

However, divergences forming on the daily chart can take weeks & even months to play out for a rally, if they even end up playing out at all. Back on May 10th, just about a week after QQQ started the biggest correction of the year, you posted a comment to the following post in which, quite similar to this post above, I had stated that: “Both QQQ & SPY are now approaching the first of the resistance levels post earlier which are likely to cap any snap-back rallies (yellow lines). I’ve also added an additional resistance level at 188.67 to the QQQ 60-minute chart below so essentially these yellow lines mark a resistance zone which could be used to scale back into any short positions covered earlier today.” https://rightsideofthechart.com/qqq-spy-approaching-resistance-2/

Your comment to that post was: “by your own standards PPO is still above the zero line on indexes daily charts. this pull back is so far identical to the other two of the rally. price resistance did not matter on those pullbacks and may not on this one. however, rsi is now in a position to be divergent on a new ath. “.

That would seem to imply that you were bullish or at the very least, clearly didn’t think that was an objective or good shorting opp (I’ll let you pull a chart of QQQ to determine whether on not the top of that kickback rally on the June 10th candle proved to be a good short entry or not, with QQQ falling nearly 9% from there over the next 15 sessions & still well below that level).

Likewise, a few days earlier under the May 7th post with the short entry on SOXX, you stated: “its been finding support at the hourly 200 ma several times, which is where it is again. regardless of trendline, its oversold, back to 50 line daily rsi. i would rather short this at 211.” https://rightsideofthechart.com/soxx-swing-trade-idea-2/

Seems pretty clear that we have very different trading styles & also pretty clear that you remained bullish or, at the very least, didn’t think it was prudent to short the semis at those levels but might have considered shorting SOXX if it rallied back up to 211. SOXX plunged nearly 15% from that point, never even moving more than 1/4th of 1% above that level where that short trade was entered. Again, another missed shorting opp on one of the biggest drops in the semis in years. Different strokes for different folks & it’s not as if you were long the semis either, just that we see the charts differently.

I also respect the fact that you state that although you don’t agree with it, you aren’t positioning the other way either (‘just gonna watch’) as your confidence on a continued advance from here must not be very high. I think that is an absolutely essential trait for any trader (to not ABT or always-be-trading… when in doubt, stay out!)

As with any trade, this QQQ short either works out or doesn’t & I even made it pretty clear that this is an “aggressive, counter-trend trade” but successful or not, the profit potential vs. the loss potential if stopped out makes up for the above-average chance of failure with it being a counter-trend trade.

Good question & for the most part, No, I don’t put much of a weighting on what the $VIX is doing when trading the indexes although I very much take into account my outlook for the indexes when trading the VIX, as the VIX will typically rise with the indexes fall & vice versa. There are certainly days when that inverse correlation isn’t in play but as far as the major corrections & rallies in the stock market, is almost always is.

Whether the market gaps up or not on Monday, I would put the odds of another big green close (2%+) at less that 10%. JMHO & about the only guarantees that come with the stock market is that anything is possible.

As far as the gaps on stock & ETFs go, I agree they suck & they are unavoidable when swing trading. There are quite a few moving parts to be aware of when trading futures and while the high leverage factor puts the E-minis & most other futures out of reach for many traders, the new Micro futures for the indexes (/MES, /MNQ, /M2K & /MYM trade 1/10th the size of the E-minis and the Crude E-mini contract (/QM) trades 1/2 the size as the regular NYMEX crude futures (/CL). Futures trade virtually around the clock so you don’t have to worry about big gaps other than over the weekend.

https://www.cnbc.com/2019/05/03/micro-futures-are-about-to-launch-heres-everything-you-need-to-know.html