Left my laptop at home today, but today's advice is short anyways. It's a great time to spectate. The short term, next few days look like a buy, but the fiscal cliff is very real and the market hates uncertainty. VIX logically is too low for a volatile time period. This talk of QE4 is suicide really, where are rates going to go from here? We are already in QE infinity.

I guess what I am trying to say is that if there could be a wrecking ball hit the market don't stoop to pick up pennies or for that matter dollars in front of it.

There is no support from the leaders lately and DIA is carrying with QQQ falling and RUT underperforming SPY. Just be patient for now.
Miguel Nasiff

Good in the morning Brian.
Are you saying that the market will go away to the fall this week?
Is it worth while doing a laying in UVXY?
What is your opinion?

Bryan Gebhart

I do feel that XIV looks ill at least short term, so you could potentially make a short-term play on a VIX ETF. Personally I am not a fan of leveraged volatility. All VIX products I have seen suffer from backwardation, at least to the way that I understand it. Since they have to rebalance daily, they have to sell off their holdings, and pay a higher premium for the term required in their prospectus. The effect is that they suffer from time decay heavily. So, your timing has to be spot on, otherwise you will lose money. I really think VXX and related products are more for day trading than swing trading.

The warning signs mentioned in "Sunny with a chance of Tornados" are intermediate issues. It means, we could have an sharp drop today, or in a month, so you won't be able to just buy a bear-position ETF and hold out. Additionally, buying a long term call on the VIX may be a slightly better option, but if VIX spikes tomorrow and you have a 3-month option, you will not realize full potential, and if you buy a 1-month option and the market takes too much time, you will lose the whole amount invested. Even with all that to worry about, then what if the market does not capitulate at all. This could be the case too. I would doubt it, but of course it's still a possible outcome, and needs to be factored in.

So bottom line is until we see further development, my suggestion is cash. No one wants to get wiped out on a capitulation movement, since we all use high beta investment vehicles, and no one wants to watch their investments bleed to death waiting for something to happen.


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