9:03 AM - I know on the surface, this may not seem like what I was expecting, but really it is. We got our touchback to the 20 day EMA, and I think the market should rally today and maybe tomorrow too. Why did I not sell my bear position? I think I will be okay, and I am interested in capitalizing on capitulation so I would prefer to keep my exposure as long as I won't get killed. Again, I cannot day trade, because I trade through a roth IRA, and have no margin, so my options are somewhat limited. I should be okay for now. I am down about 1.2% overall from my purchase point. I expect to lose more today. Despite the market rallying hard and for now appearing to gap up hard, I suspect we will see further up. I plan to place another short around 143.88, which I believe will be our new short term top (at least for a handful of days). Then I would see us retrace to around 139.5-ish again, at which point I will likely dump my first short and hold my second. But, we will need to see the market conditions at that time as well.

The more it rallies the more bearish I am. Things are not what they appear right now. This is common behavior before a collapse. The market has way too many bulls, but still not enough to crash quite yet. 

Let's take a quick look at the disturbing stats:

$VIX - 15.51 bounced off mid BB, heading down, but already 1 std dev below 20 day
$VIX:$VXV - .902
$NYMO - $41.07 in top second std dev, already pierced top BB a couple days ago
$CPCE - .600 in lowest second std dev. pierced bottom BB 19th.
$CPC - currently .83, pierced lower BB at .64 on the 26th, a 6 month low.

If you are not familiar with all these, the combined effect is that investors are very complacent, and the few that are protecting themselves see a need to pay premiums for short term protection. If we combine this with our VIX expectations, and so far I do not see a need to deviate from my current plan. 

IWM, QQQ and XIV are all bullish, and that bodes well for a rise today. Without getting too in depth, there were a number of bullish crossovers yesterday as well on many ETFs and indices, but we are getting into overbought. I would be inclined to expect a gap + rally for today. I am sort of thinking about setting up a strangle / straddle, but we will see on the next good entry point.

Lastly, if you are following me or my advise, be aware that I am okay with draw down. I will get a better point to sell, but again I am looking for exposure when possible for the next couple weeks.

Leave a Reply.