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The $VIX Report: Upside Levels
Last week we noted: "The $VIX has failed to break 12 or rather more importantly, a level of 12 continues to be where selling in the equity markets takes place. I have contended that the inability of the $VIX to break below the 12 level is a sign that the current market rise is not sustainable, and this divergence has been going on for over 6 months now. In essence, the $VIX has failed to confirm the price action. More importantly, it appears that the rocky start by the equity markets this week will see the $VIX close above a prior key pivot point. This always suggests caution as the possibility of a trend change in the equity markets is very real."
LAST WEEK
Figure 1 is a weekly chart of the SP500 with the $VIX in the lower panel that we showed in last week's report. The break below and then above a key pivot point (i.e., the black dots on the $VIX) is suggestive of a reversal, and this appears to be happening.
Figure 1. $VIX/ weekly
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THIS WEEK
Last week's reversal in the $VIX seems pretty much confirmed, and as we end this week, we find the $VIX challenging the 14.64 level. A weekly close above this level would in all likelihood suggest on going losses in the equity indices. Figure 2 shows a weekly chart with the next $VIX level of concern.
Figure 2. $VIX/ weekly
As stated last week, "the rally is running out of steam, and there is a real possibility of a trend change." This week's price action in the $VIX is adding confirmation to these observations.
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http://vixandmore.blogspot.com/2012/12/volatility-during-crises.html
I have absolutely no idea what VIX is and I've been making money trading markets for thirty years; does this give you any idea a to how valuable this is?
It's a balm, a palliative salve. 50% petrolatum, 40% menthol (eucalyptus), and 11% H2O (only god is perfect). It's used for chest rubs when you are congested, have a stuffy nose, and upper bronchial passage discomfort. Don't take internally past the nasal passages, but it's been known to provide an extra kick for homosensuals, when sparingly inserted.
I've been 'trading markets" for 20 years, and still live in the same house, drive a 22 yr old Toyota P/up that they will have to pry from my cold dead mitts, and a 26 yr old 911. And I've yet been able to make enough pelf to buy the second home near the equator to get the hell out of here during this Norwegian winter (how in hell those people live in it for 6 months a yr is inexplicable to a rational man); keep a nubile, bodaciously Ta-Tahed Eurasian mistress in comfort on St, Barts for my occasional visit; and realize that without Deep Inside Information, several weeks ahead of leaks to the 1%, it is impossible to be a member of that august group.
Nothing wrong with a 911; it's a great car. you can rent a house in Uruguay; for instance; very cheaply. I used to go to Mexico for the Winter every year before I moved to Hawaii permanently. There are some beautiful places there to spend the winter too. I never felt like I wanted to support anyone as a mistress; but I suppose I did; because I had girlfriends. Once when I had the 35' Piver Trimaran here in Hawaii that I sailed over from California, I had a three girl crew; all teen agers; but then I was only 29; I retired early. The important thing is to forg et about the Stock Market and start studying futures charts; and open a futures trading account. the problem you're going to have there is that you have to discipline the order takers; they call you up and try to g et you into "sure things'; you sometimes have to be quite rude to stop this; or threaten to move the account to a different brokerage. (If they knew anything, they wouldn't be answering the phone for a living). What do you do in Norway during the working season?
Well, you do it like this. open a futures account and forget about owning stocks, options, or ETF's. Then you soak up general knowledge about various markets; like feeder cattle, and long bonds; which are completely different in behavior; and you look for irrational highs and irrational lows; keeping in mind mass psychology; or the mass mind. Instead of trying to have a trend following system you try to pick tops and bottoms. Waiting is important; most of the time you're just checking charts and general info. and waiting patiently; like a tiger at a water hole. Then you see something that's self-explanatory; like for instance The Swiss Franc at 1.41$; with the explanation supplied by the mass media; the Europeans are panicking out of the Euro and into the Swissie, (this happened a couple of years ago); looking at the chart you see that the price curve has already gone vertical; the next day it doesn't quite make it back to 1.41$; so you short the shit out of it; commit half your trading account. Why? Because governments have considerable control of their currencies, the Swiss have been here before, and they don't want, and won't allow an over-valued currency; so you have somebody on your side in this trade; the Swiss National Bank; sure enough it starts coming down. where is your profit target? You don't have one; you never hane one; that's part of the method. after a few days; you can put in a zero loss stop order on your contracts; so you do; this is also a part of the method. Then one of two things will happen; either you'll make an embarrasing amouint of money; or you'll lose nothing. Okay? okay. A week later, the Swiss National Bank anounces it's going to peg the Franc at 1.20 to the Euro; immediately you double your position; which is now already able to support itself off of paper profits; ie. you're playing with the markets money. When it actually lhits 1.20; you buy back all your open positions. Profit? about 600%. The whole process took 12 days. People told me I was just lucky that they intervened in my favor; was I? No. Luck happens to the people who understood the situation first; and played by the right rules.
Yes, Vicks vapor rub; I remember it well from my "chesty" childhood. Absolutely no inside knowledge of any kind is required; ever. What is required is the futures trading account and some familiarity with how it works; what the orders are called, how to run the account, this you can find in a cheap book. Always you're looking for the irrational. Markets are not rational or efficient. Many markets are manipulated, temporarily, for the benefit of the manipulator; notice this and go along with them. After they drive the differential in Corn betweeen Sept. and Dec. to over a dollar a bushel, (which is completely ridiculous), you put on the trade they're going to use to take their profits and skin all the trend followers who've been following them; I watched for two months, before I was sure it was done; then I sold the high month and bought the low month. The unwinding started immediately; in two days I had both of my zero loss stops on; and I didn't care anymore; nothing to worry about. three weeks later, (agriculturals move slower than FX or Bonds), I collected my 800% profit. As it turned out there was more available, but I didn't care; it was no longer a sure thing, and I preferred to have the money in the account. 90%+ of the time that a market "breaks out" of a trading range; it reverts to the mean. this is crucial; you must understand this; this is why you try to detect trends. You sell irrational highs and buy irrational lows; and if the market goes against you; you get out fast with a small loss; you're not there to make losses. Right now I'm short the British Pound and the S&P; but I put these positions on during high days; the S&P at 1841; when my broker told me I was crazy. The Pound at 1.6650; when it was obviously going up forever; remember, most things revert to the mean and nothing goies up forever. The Pound is a manipulated market because it's low volume FX trade. I waited till the Bank traders had bid the price up to a ridiculous level, (far above the mean), in a currency which has no visible means of support, and then I sold it short. What is the advantage of this? If it goes up some more, I know immediately my timing was wrong and I take my loss; because my only rationale for the trade in the first place was, "the price is too high". As it turns out I still have the contracts and a zero loss stop in place; so nothing to worry about. This is an important trade because sooner or later the Pound will crash big time; England is so fucked it makes It aly look like a success story. the markets are not efficient and the prices are frequently wildly wrong. Remember t hat's how Soros made his Billion dollars by shorting the Pound. Why did he do it? because of a little fundamental checking up; it was obviously too high. It's obviously too high now, too. Absolutely no inside knowledge is needed. I want to explain this to somebody because I know it's right and I'm 70 and I'm going to die; someone should g et some use from this. Ask me questions. T here are U-tube videos from seminars from many years ago explaining the concept of "stumbling" on a trending market; you don't know the future, you just try things, and when something works; you hold on to it; sooner or later you'll get a market that's trending. But you detect the high, or the low, and take the position, then the trending is revealed over time as you keep your hands off. Some markets are seasonal; for instance Feeder Cattle can be traded robotically; taking a position at a certain month and selling it again four or five months later; year after year after year. all markets are different. Feeder Cattle is a tiny market with no big swinging dick Bankers fucking around in it; you're just dealing with cowboys and meat packers; not math. geniuses. It's appropriate for someone with a small account. It takes patientce. You won't get rich overnight; but you will get rich.
ZH is rapidly turning into a TA wanking contest.