August Trading Notes (TQQQ – LEAP Puts)

Ticker / Instrument: TQQQ – LEAP Puts

Trade Type: Long-term bearish position (LEAP Puts)

Rationale:
I initiated this trade because TQQQ appeared overbought and technically due for a pullback. On the weekly chart, the Commodity Channel Index (CCI) had been trending down and crossed below the +100 threshold, signaling a possible trend reversal from bullish to neutral/bearish. See Figure Below:

From a macro/valuation perspective, multiple long-term valuation measures suggested the broader market is expensive:

• Buffett Indicator – at elevated levels, historically associated with overvaluation.

• CAPE Ratio – well above historical norms.

• Price-to-Sales Ratio – stretched compared to long-term averages.

• S&P 500 Mean Reversion Models – indicating limited upside from current price levels.

That said, two factors tempered the bearish case:

• Earnings Yield Gap – still suggests the market is fairly valued relative to bonds.

• Market Sentiment – currently neutral, not overly euphoric or fearful.

Position Size & Risk Management:
Position sized small to moderate (10 % of my account), acknowledging the risk that valuation extremes can persist. This trade is intended as a longer-term hedge against potential market weakness, rather than a short-term speculative investment.

Goal / Exit Plan:
Will sell into strength starting at a 50% percent return.  Some of the positions will be stopped out if their price drops 20% or the CCI reclaims +120 on the weekly chart. Additionally, all PUTs will be sold if the price drops 30%.  I will reconsider more PUTs, even if stoppped out, if the CCI resupports a bearish thesis.

Notes:
Will closely monitor macroeconomic data releases and shifts in sentiment. Will also watch for confirmation in correlated ETFs (e.g., QQQ, QLD) and broader indices (e.g., NASDAQ-100, S&P 500).