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The VIX is Screaming
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I will not bore you with a long post; I
just want to point out that the VIX setup mentioned recently is
working out perfectly.
http://www.zerohedge.com/article/get-ready-sell-stocksbuy-vol-setup
From an intermediate term perspective,
it looks like we hit a wall on that move above 1000. With a GAAP P/E
above 100 on the S&P and deflationary headwinds, we had to stop
somewhere, bullish Merrill and Goldman strategists notwithstanding.
Livermore correctly observed that one
should never short the first break. There should be some sort of a
rebound courtesy of our mean reverting HFT friends, which could be
infinitely shortable... Until then, I look for expanding daily
ranges, a bid under the dollar, a sell-off in gold bullion (as
irrational as it may sound, especially silver), and a big rally in
the bond market.
http://www.zerohedge.com/article/dont-be-too-bearish-bonds-seriously
I know you hate them bonds, but I am looking for a move below 3% on the 10-year when the inventory rebound is over and final demand disappoints... I am open to suggestions as to when that might be.
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November.
second that
sorry, cant help you; my eyes are on China and im basking in teh glory of my shorts ( kidding ). no, seriously, i dont know who is looking for that.
Below 2% - wow! If that is on a smart guy's chart, then they are definitely seeing black swans of desperation.
Mid to High 2s (2.825%) is my safe guess.
Like most: I only see it as another short-term flight to safety. It won't mean a hill of beans to the mortgage market. Talk about a deflationary event? They'll have to come up with some new methodology to mask the consumer confidence indexes that go to zero.
Mind you, China had basic universal healthcare until Zhu Rongji's (remember him - the prime minister who dared a western
sleazy linking practices; borderline fraud ..http://www..
hat tip: gay porn and deceitful, slimy operators
Prechter at Elliott Wave International is calling for a tres rally as a flight to safety, but no price target. His commentary is similar to our fine author.
A quick definition:
flight to safety (n.) - when all else fails, buy bonds of the government with more taxing power and a central bank with a fire hose of credit printing monetization.
Don't forget a reasonable and moveable fighting force.
third that. My USD and treasury calls are climbing and so are my FXI and SLV puts.
Well, I can't give you a timing call on the bonds, though I cannot see where the money will run otherwise. But, I am playing long strangles on short term binary options (weekly, some daily, no time for intraday), they have too many ballast to fill and discharge to weather this storm. I agree, things have not changed in a sense that the PPT certainly will play the commodity cards. No matter, the volatility is great, but timing is crucial of course.
Andy,
where did you get that Livermore stated that someone should never short the first break? From “How to trade in Stocks” I got that he shorted 1929 five times without success and then finally caught the down-move and profited immensely. Looking with the benefit of hindsight at the pattern of ’29 your comment makes sense.
To back up your comment about the sell-off in gold and silver a quote of another trader of the old days comes to mind: Robert Rhea observed that in a panic the quality-stocks get sold because those are the only ones where there is a buyer to support the investments that can not be sold at any price.
That would be Dow Theory; and I agree that it still makes sense.
It is in Livermore's Reminiscence's. He stated that the first and last breaks are always the most expensive. That is precisely because he learned the hard way.
I highly recommend reading the book, but as as spoiler he did state that you should stick to your conviction. The reason he states for the 5 shorting positions is that he was convinced he was in a "bear market" so all he was doing was timing his entrance while limit losing his position (he used tape reading/technical analysis and not fixed stop-loses for this)
As Livermore stated. The single most important decision is whether we are in a bull or in a bear market. That is where the money is at. All other decisions should come easily after that. However, this is precisely where mainstream analysts go wrong. They are taught to believe in a perpetual bull market and to analyze stocks on an individual basis. They do not understand the idea of inflation / deflation.
Well... The CAVEAT is that Livermore went completely bankrupt some 7? times, and eventually shot himself in a lavatory in desperation.
"On a long enough timeline, the survival rate for everyone drops to zero" - This is precisely why I lobbied for the return of the motto. You are most likely playing high stakes because you have been very successful in your past speculation. Just keep in mind that sooner or later we all make mistakes. These mistakes are in proportion to our confidence levels.
I for one got completely trounced by this bear market rally. I got myself into some very illiquid positions which I was unable to unwind at an appropriate price.
On a wider screen, this chart has a nice rounding shape which could go to what? 45? 50? over the next couple of months. Then a little pullback and it's off to 60?
Should be an interesting fall (autumn should be interesting too).
Andy:
Please hyperlink the image. Page layout and table margins make it difficult to see the right hand side of the image.
Big spike on the vix...this trend may continue.
sleazy linking practices; borderline fraud ..http://www..
hat tip: gay porn and deceitful, slimy operators
"a sell-off in gold bullion"
Could be right, considering what happened last year, but overall it is set to rise again vs. the SPX. A bullish divergence beckons on the $Gold:$SPX chart -
http://stockcharts.com/h-sc/ui?s=$gold:$spx&p=D&b=5&g=0&id=p37755388504
Gordon. You know my thoughts. We either have inflation or we have deflation. One is good for gold the other is not. You can't have it both ways.
Andy,
My friend. I don't know if you follow Mish but his E-wave update also shows a higher move starting for the dollar i.e. DXY, and so far it seems to be playing out well. Don't have a link handy unfortunately. The downward correction in the Sterling crosses was also quite evident based on the chart patterns and last months minutes. Shorting from the circa 163 high of GBP/JPY has been good.
To backup Arm's statements, the patterns work out, but you need perspective.
That's right. Definitely covered with ticks and fleas. Swedbank action was a horrible move of flogging worthless rubbish.
Anyway, I think we might see GBP/JPY at 152 within the week but it should make a move higher on any FTSE recovery tomorrow before heading downwards. Overnight Asian action and tomorrow's CPI and RPI numbers should give us something to work with.
I mean recovering from todays losses. So possibly watching out for upside potential of roughly up to 4730 on the FTSE 100.
GBP/JPY has strong correlation with UK equity market but I am sure that's a no-brainer. Moves in the US market also knocks the socks off the pair depending on the news flow. Today's Manufacturing Index news report knocked the six out of the decline but then it resumed back towards 300 pips and beyond.
Alas Mr. Dufresne, I lack YOUR long term insight in this wild market. All I know is we are likely to have an up day in GBP/JPY and Cable tomorrow. At least in the morning part unless Asian market kills the rebound or things change later in the NY session, which time and again has proven to reverse daytime moves. CPI and RPI numbers to provide food for thought tomorrow.
1.6550 (R) and 1.6350 (S) are key levels to watch out for in Cable, in my opinion; breaching the latter could mean a further leg down of circa 500 pips before we take a breather.
Mish's admits that he is not an EWT guru and sort of throws counts at obvious targets. A few weeks back Mish linked to Daneric's Elliott Waves (who was on the old ZH bolgroll cause I got TD turned on to him). Another reliable blog for EWT is Kenny's (of stockcharts fame) they both are free and good. Interesting that they are in different counts. They are also in constant comparison to EWI's position, thus they will keep you current on EWI's stance as well. I suggest checking them both out. Excellent work.
http://danericselliottwaves.blogspot.com/
http://kennystechnicalanalysisblog.blogspot.com/
fwiw
This market is difficult to short imo.
Friday's action killed shorts at the end of trading day. Monday opened sharply lower and will probably rebound some by end of day. Overnight positions in inverse etfs for example can prove fatal if markets happen to open higher tomorrow.
Only sure thing is the massively overbought emerg. markets where credit supply has just been given a death warrant by Chinese treasurer.
someone i know went all-in short afterhours on friday after seeing that bullshit recovery in the last hour. sold out everything this morning, it was a thing of beauty.
it wasn't me.
my inverse positions got stopped out Friday.
patience is a virtue, I've learned.
time is on my side
VIX options expire tomorrow, so they will want to keep it between 27.5 and 30. watch for the VIX and the SPX to hover around this area until tomorrow, and then wed it will most likely break out to the upside.
Thanks for taking the time and effort to share your thoughts and experience, Andy. I always enjoy your take.
10 yr yield off 10 bps today....that caught my attention.
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now I understand why all charts on this site end up being covered by the right column in chrome...you do your CSS in inches ;))
Bond rally might be the last chance to get short TLT around 110 ish
Previous lows won't be happening for 2 months minimum on a weekly chart so you might want to put the party hats away.
The speed of the shakeout will be much faster. The speed of the collapse will be proportional to the irrationality of its height. By Thanksgiving, I think, at the latest, the March low will be tested. But some other factor will be the catalyst.
200 week MA and doji star on monthly candle in July showed a very bullish reversal for Aug
http://bit.ly/WNOZM
Well looks like your $VIX screaming was a dog bark and not a bite; if you're going to comment on technicals and you're using weekly charts, wait until the week is over - just like it's not how the day starts but how it ends, the same principle with weekly and monthly charts.
My data is showing that the $VIX is more likely to test 22 level (and fill the gap) before traders start buying protection and we get a blow-up
There have been bearish (for equity) changes the $SPX/LT-bond ratio, AND the NYHL index is showing some deterioration, so might pay to watch these.