Each time we go down, fear rears its head as people sell their stocks and drive up the price of put options, which drives up the value of VIXY .
The last selloff was "BARELY ANY FEAR" as noted in the small rise in VIXY into mid-March on the last decline.
This time there is barely any noticeable lift in VIXY to show that people are either hedging by buying puts or panicking in any way whatsoever. THIS TIME IT IS A MAJOR SIGNAL THAT I WOULD NOT IGNORE.
I don't think many signals like this come along in a period of many years. So, even if I am wrong and the market shoots up from here, I don't want to miss this signal. This is DANGER DANGER DANGER right here.
Danger, that is, if you want the market to go up. This is a great signal to go short. One of the best signals.
We are looking ahead at the end of the quarter and probably every fund is already invested up to their gills to show for quarter-end, but maybe, just maybe, they have held onto some cash for marking up their portfolios into quarter end. That is the only hope though, based on what is going on here.
I may sound confident in this setup because I am. I just want you to do your own research too and look into these setups and see how much you need to hedge and just exactly where to place your stops and when to know when this pattern isn't panning out.
Each day I will do my best to update this chart an show you what the market is telling us to do. Message me - reply to this chart - and I will see how take advantage of this very setup that is in place right here.
All the best,
Tim 1:21PM EST March 25, 2015 206.59 last SPY
Can you confirm your reading? You think that the lack of vol reaction is bearish because there's no fear?
The last 2 days feels like:
they remove their sp500 and the hedges that goes with it, hence hammering the volatility... and they buy DAX which was surprisingly resilient given the fact it is overbought and eurusd has been lifted at 5 figures at the same time.
To be honest, sp500 being in the same area since Nov14 and being clearly pivotal, days after days we keep tweaking charts into range, crash or follow through scenarios... after a while we go through all possible scnearios... I guess what matters is to squeeze a few legs in trading.
We all know it is going to correct hard at some point... Question of money management and anchoring points until then and ideally to be in the big short when/if it happens.
eurusd could be range bound between 1.06 and 1.20 in the next few month.. and if 1.17 just before crash... eurusd could touch the bottom again without making new lows....
I am not sure honnestly but big big picture, what we just had on EURUSD could be a bottom for many moonths..
I got a question for you. Right now, I am 90% invested in beat-up energy stocks, 10% cash. I suspect that the final leg down on oil (I am 90% sure it will happen within a month) could be the last straw for S&P 500. I never done any short sales before but feel pretty confident the general market can only go down (at least not up) at this point. What's the best way to short S&P 500 now? Is it buying ultra-short ETF such as SDS cost efficient? Or you have any good individual short selling ideas on any individual stocks?
Thanks in advance.
There are multitudes of ways to short the market. I personally just short the SPY itself. There are many options strategies too. Buying a short selling fund certainly works. I can't recommend any one of them because I personally don't use them. Over the long haul, you have to trade those short funds or they will just grind down to zero.
As for individual stocks, you can look for individual stock ideas that I post. I posted GMCR the other day and AAPL. AAPL has a nice distribution pattern right now. I will be posting more short charts in the next week or so. I think the first week of April will be when portfolio managers start going to cash or buying up the beaten down energy shares. So, I see more of a rotation out of high volatility, high-beta names, and into the beaten down or the domestic stocks that aren't hurt by a rising dollar.
I do see a down market for the balance of the year, with one intervening rally this summer. A grind-it-out sideways to down market this year.
Stay in touch.
I like your idea on GMCR the most. I have been watching GMCR for a while, believing it will fall but the idea of shorting it (or any stock) never occurred to me. Somehow my brain is wired in such a way that it automatically labels the short side of any trade with a big risk sign. Logic tells me that's not true but I guess it's just something I have to overcome. GMCR is such a good short candidate that I believe $90 is almost a given. Even $57 is possible if the market gets really ugly.
Of all of your posts, the only idea I have a different opinion on is TSLA. I think over the long term, the case for either long or short is weak. Too many variables for this stock. I'd rather trade something that I feel more certain about. There are so many better-bets on the markets that I would never even touch TSLA, long or short. So I am curious as to why you like it so much, maybe just as a great demo stock to show Tradingview readers how to setup trades?
I want to thank you again for educating tradingview readers like me. I consider myself a value/contrarian investor and not a trader. However, many of your posts presented original, thought provoking ideas that even fundamental investors should benefit greatly.
Thanks for your reply.
I'd like to address your Tesla question: I guess I love to cheer for the underdog and for great products. I've been cheering on Tesla from the $30's and have made more money in Tesla than any other stock in a long time by going against the "grain" of sentiment, since Tesla had one of the largest short positions in the marketplace. I love the product and would love to own one, but at this valuation, I agree that it is going to be difficult to increase the value of the company until more visibility is there for the Model-X and the next generation car after that. I honestly think they will have sales that surpass all people's expectations. I've watched all of Elon Musk's interviews that are available and his grand view is missed by most investors that comment on public threads. Example: He wants competition. He wants competitors to make great cars to compete with Tesla. In the long run, that is how you build the market for electric cars. He feels confident in his ability to produce profits at any volume level from here into the distant future, but you need to have a mass-adoption mentality to make that happen. For now, he has an unrivaled product that has overcome every imaginable hurdle to get to where they are. What Tesla has accomplished is nothing short of a miracle. A brand new company has made a car that has matched the highest rating of all cars ever made. Unreal.
So, back to trading, because the short sellers have sold so much stock short already, then that is fuel for future repurchases of stock. Whenever short interest on any stock is high, it has terrifying drops as the shorts press their bets and try to break the stock, so it makes for EXCELLENT trading since the downdrafts are going to be more short and sharp, instead of prolonged and steady. So, technically, Tesla will be a great trading stock.
Secondly, Tesla is just a great trending stock since it has been responding so well to the methodology that I am constantly discussing and using. That is one measure of any market in general - how well does it respond to technical trading. I can say the same for Bitcoin. Bitcoin charts are fantastic for technical patterns.
Regarding your value/contrarian investor style, I feel like I am right there with you on that. Tesla isn't a "traditional value" name at all, since you are buying 10 years into the future, which will be 500,000 cars a year sold (not just 25,000). That's a big number to discount back to present value.
As for other areas of "value" - I've always focused on stocks with brand names and long histories of profitability, especially with being able to raise prices when costs go up. If you buy at the right price when there are "values", then when stocks get higher-valued you don't need to be as careful about them. The drug sector is what I'm thinking about here. There are long swings between undervalued and overvalued.
Thanks for your comments and your questions and please send more along!
Thanks for sharing your wisdom!
I always believe a good trader/investor has to be a good philosophical thinker, while charts/data are just tools to help us gauge the situation. If seems that some charters here are too obsessed with their tools that they often forget the bigger picture and thus can't make big money at all.
I think you just showed us how to and NOT to use tradingview, and that's of mighty importance.