VIX’s Bollinger Band and the S&P

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Below is a chart that shows a nice correlation between the price action of VIX and SPY and their 20, 2 Bollinger Band. What the chart shows is that typically when the VIX hits the upper level of its Bollinger band along with SPY hitting the bottom of its BB, it marks a low in the market and a bouncing point. It is same on the opposite side of the Bollinger Band, so when VIX touches the bottom of its BB and SPY touches the top, this marks a top in the market.

VIX touched the touch of its BB yesterday but SPY did not. This pattern usually jump starts when both hit the BB and the VIX will typically hover around its BB for 2 – 4 candles. For SPY to hit its BB it would need to get to 203.38, which is right around the March lows. This correlation is pretty strong and it shows there is some potential for further downside but it is limited. Plus our signal is flashing oversold I know not music to Slopers ears so be careful!

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So……

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The past twelve hours have been just bizarre. The newest little war in the mideast broke out yesterday after the close, but the ES and NQ didn’t seem to care for many hours. Crude oil, on the other hand, went absolutely ballistic, as did (later) precious metals. And yet since peaking in the wee hours of the morning, gold has been just pooing all over the place, and the the once-glorious drops in e-mini (like down over 20 points on the ES) have turned into green (just like some Slopers adroitly pointed out it would early this morning).

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Revenge of the Killer 5DMA Stat

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Well I said it would be a big break if my rising channel broke and well, here we are. SPX broke back below the daily middle band yesterday and closed at the test of main rising wedge support. That has broken down at the open and we are back to the stats I gave at the break back below the 5 DMA a few days ago, when I said that every similar break since the start of 2007 had resulted in a lower low before a higher high. I’m expecting that lower low under 2039.69 this week and most likely today. I’d add that the daily lower band is at 2040 so that really is the next obvious target. SPX daily chart:

150326 SPX Daily Rising Wedge BBs MAs

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Three Eye-Openers

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What a night for news! The three big items that leap out at me as I blearily start the day…….

  1. That the 28-year old co-pilot of the Germanwings flight was the one who did the deed.  Good. God. In a way, I’m relieved it wasn’t a terrorist attack or a mechanical failure, but that didn’t save any of the poor souls on board. I’ve always thought that dying in a plane crash would be an especially horrific and terrifying-beyond-belief way to die. For this man to subject nearly 200 people to this………..words fail me.
  2. The mega-surge, then just plain surge, in crude oil – I’ve got a smallish-mediumish size short in crude oil, but more importantly, I’ve got a smattering of energy shorts, so oil’s Yemen-based ascent is going to definitely tax some of my otherwise good profits this morning. The only silver lining for me is that, in CNBC style, I can say that oil is “well off the highs”, since it’s up less than half as much as it was earlier in the session.
  3. The liftoff in gold and silver: like I’ve said many times, I actually do want precious metals to perform spectacularly (for a variety of reasons), but at the moment, I’m short silver, gold, and miners – – so, again, that’s going to take a bite out of what would otherwise be what’s looking like a pretty good day on the short side.

Well, that’s it. Time to get this party started.

Risks and Opportunities

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Greetings from California Barber Shop, where for $17 you can get the best haircut in town if you are willing to wait literally two to three hours for your turn. This place is totally old school, and in spite of its popularity, the two Cambodian chaps who cut hair here move along at the same snail’s pace they always have. Paradoxically, their slowness (and care) is what keeps people like me coming back. It’s the one pampering in my life I allow myself. And it’s all of seventeen bucks.

The downside, of course, is that I’ve been here for nearly two hours, and I’m still not in the barber’s chair. So, resourceful chap that I am, I found a Dell CrapBot 9000 ghetto laptop in my trunk and am cranking out a post for my beloved Slopers. This blog does not rest.

Simply stated, I am aggressively short, with an increase in my exposure on the short side today in the precious metals and energy sectors. That may seem odd, given their strength, but I’m a contrarian, after all.

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