Feb
5

VIX Breakout

vix_003

I’m busy doing other things today since I remain 100% in cash, but I did want to chime in with the market moving strongly lower again. The bull flag on the VIX has broken over the 200 DMA. The VIX is also ticking up close to 30.

I’ll do a rundown over the weekend, but I definitely would not buy into the close today. Internals are very weak (TRIN is over 1.50 as I type this).  I mentioned before that the indexes were headed to their 200 DMA. We’re not there yet.  Once we get there, a decision will need to be made whether to buy the correction or whether this is something bigger. Next week could bring big risk/reward opportunity. If the indexes do make it to the 200 DMA, it could be a great buying opportunity if this is just a correction.

However, buying at the 200 DMA carries a lot of risk. Remember my post titled “Don’t Fear The One Day Crash” Well, when you buy around the 200 DMA with an elevated VIX it is the precise point in time when the market is most vulnerable to a big one day event.

More to come over the weekend.

RedditFacebookStumbleuponDiggDel.icio.us Posted by Charts and Coffee Uncategorized Subscribe to RSS feed
  • I'm approximately 85% in cash... I hold a few positions that continue to rise, and I hold an inverse to make money as the markets plummet.
  • I have all these bull hammers on XLE stocks--those are always 50/50 for swing trading.
  • What a strong finish today! I didn't see that coming.
  • looking at all these high flyers that have fallen back to earth sure does make it tempting to go long here, check out X having gone from 66 to 43ish in short order and bouncing off the 200 day today. seems like the perfect buy opp and yes today was a nice reversal - I'm leaning to more surprises to come though, for now - powder stays dry and will let the charts set up (or not) again
  • The next 1-2 weeks will likely be very big in terms of "making your year" IMO. I'll have my thoughts up tomorrow sometime.
  • MON, looked good at $75's. It has enough EPS to do really good this year. Possible new yearly high, if the market ever decides to rally again.
  • AG commodities have been getting torn up the last few months. I would think that would weigh on MON, MOO and the rest of the AG stocks.
  • Guest
    1046 is the key level in the S&P. If it cant hold, then we will probably get to the 900s. Just my personal subjective opinion.;)

    http://bit.ly/b5Y91U
  • The market will definitely find some support at the 200 DMA. I think it is a foregone conclusion that it will act as a price magnet. That is a big reason it makes no sense to buy right now.

    Hard part is whether to buy the 200 or wait a few more weeks for the tug of war to play out and starting playing the short side if this is something bigger. Ultimately, for the prudent trader it will mean scaling in one direction or the other.

    For those that go "all in" and get it right, we'll hear about huge gains and how they are the greatest trader ever. We won't hear anything from those that go all in and take the wrong side.
  • so true - this is the exact setup I used to go completely and utterly "all in" on, plus margin - Friday had a nice reversal, closed on the high of the day, volume was way above average - must mean the bottom is in! I'm being patient this time - going to let the market show it's hand next week.
blog comments powered by Disqus
Disclaimer: This blog does not and is not intended to provide financial advice of any kind. Any commentary used on this page is for purposes of discussion only. You should not construe anything on Charts and Coffee as recommendations to buy or sell securities and you should not construe anything on this page as legal, tax, investment, financial or any other type of advice. Nothing contained on this page constitutes a solicitation, recommendation, promotion, endorsement, encouragement or offer to buy or sell (whether it is securities or otherwise) by Charts and Coffee, its owners, representatives or agents.