Lower high for the Dow? Wed May 20

After their big Monday rally the US scratched around to finish flat to down with weakness in late trading. Here's the daily chart. It's obviously speculative but if the DJI average fails over the next couple of days then a top could have been formed.

It's 12.10 pm and our market has fallen from earlier small gains to be down 14 points. I've got 3 positions, all short, in cba, mqg and qbe. Cba and mqg are down 0.6%, roughly in line with the market, while qbe is a bit weaker having fallen 1.3% but that's after a big rally yesterday.

I'm trying to stick to the idea of having very few, quite focussed positions. Just one or two really but very high conviction. With that in mind, I'm happy with qbe and I'm prepared to give mqg more time but will look to get out of cba. At the moment it's a bit weak and therefore going my way so I'll try to optimise my exit.

Qbe, below, looks like it may have completed a 3 wave retracement early today without having rallied back through the previous pivot at 2150 indicating that the stock is trending.

Mqg is less clear but might have formed a very flat pennant style correction. If it falls below the two near term supports of 3336 and 3303 then I think it can go to 3000-3100 quite soon.

If I focus in by looking at the 30 minute chart then it's not obvious which way this is going to go. Even if I anticipate this being a 3 wave or a-b-c correction (to use Elliot wave terminology) then the c wave could have further to go as it has had an initial surge followed by a tight range and could extend further with another pulse or two, up to 3500 or more.

By contrast, yesterday cba pushed back into the tightest part of a trading range after having made a minor break within that range 4 days back. The short position is via June 3500 puts which aren't overly sensitive to time decay and stock price movements at the moment so given my bearish stance I'm not willing to just dump them. The point for me is that I don't want to enter a position unless I'm very confident of a good short term move - a minor sell signal in a trading range is not necessarily the best quality indicator.

2.02 Unwound ncm as frustratingly it finally ran. My hedge cost me the chance to recoup earlier option losses. Hey ho.

4.10 As the indecision continues the market rallied slightly in the last hour or so to close up 7 points. The more I looked at mqg, the more I felt that while I see it as a retracement, it looks liable to rally another dollar or so. So I bought some stock to overhedge the puts and hence go long as it finished at 3426.