9:15 AM - On the surface in premarket, the market looks poised to strike for today. All indices are up, with IWM and QQQ leading SPY, and XIV is more than it's beta over SPY at the time of writing, so everything is rosy, right? Well, Yesterday ended on poor volume, and we have not really seen good accumulation days. Who knows, maybe the market will turn a corner here, but let it prove that it will do so first, and for the record, I doubt that this rally will have substance. Personally I think a gap like what we are seeing premarket is way too aggressive. Let's look at the basics.

1.) Gaps must be filled sooner or later. Most are filled the same day. If I held a long position in the market, I would sell it on open, or within the first hour.

2.) Let's say the market rages on, and does not fill the gap today. Then you will have to worry about it doing so soon.

VXX has been showing positive divergence on STO and MACD with a positive MACD cross-over in slightly negative territory. VIX has been showing positive divergence from SPY lately as well. Yesterday is another good example for that. Additionally VIX:VXV is still creeping up, even on semi-bullish days.

As mentioned previously, I do a number of backwards tests on various correlations, algorithms, and "signals" to test their accuracy, meaning, and how to best tweek them for personal use. VIX:VXV can linger warning signs for a while before something happens. It can also linger afterwards too. However, if you stick with a game plan, your results are nearly tens time better than not using it at all, assuming the market will capitulate from time to time. There are even times when VIX:VXV will signal a warning for weeks and then nothing comes about. So does that mean it's broken??? Not at all. In the end, after back-testing it, you will still outperform the market cycle over cycle using it. You will not outperform each individual cycle, but again cycle after cycle. This is important, because we all have many years to retirement, and we will see many cycles.

But I digress yet again. For today, I am likely still staying in cash. There are plenty of day trade moves, but I am a swing trader and we need a calculable 3-5 day trend. The market is overbought and news driven, so watch for more of the same from the past week or so.



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