My hedge on the market yesterday as I took profits on my VIX calls. In the last 3 trading days the VIX has climbed about 42% which has mant my calls doubled. Nice work AT! But was that designed to happen and can you repeat that wity 100% confidence. The answer obviously is No. I got lucky with the timing. The calls were slated to expire next week and they were far out of the money calls – as I had mentioned it was not a trade but a hedge. I was prepared to lose that money.
OK, so how does the market look like. Well Fear is defnitely in. Let’s look at the big indicators:
SPY: it’s broken, maybe wait for the bounce today and then take action, definitely looks bearish at this point, the only danger is that it has broken in 3 trading days and maybe we need to still wait and watch to see if this is going to be a bigger swoon
IWM: same as SPY – broken
EEM: just went truly bearish yesterday, so broken as well
XLE: close to broken but not yet really
XLK: yes, broken
USO: not yet broken, wobbly and needs to be watched
So, really almost everything looks bearish or broken (as you can tell it is my favorite word for today) but it has been very quickly broken. Most of these indicators were trending sideways for a while. So, the 2 days of downturn has made them look really bearish. I think I am not going to take any action today but have a wait and watch approach.