SPY/VXX divergence is sounding an alarm

Since Christmas Eve 2018 we've seen a vicious rally from the lows. On December 27th, I called for a rally to 2625 before I would try getting short again. Unfortunately, the pain trade has been on as nearly every technician called for resistance in the 2620-2630 S&P levels and my subsequent short call was stopped out.

Now that we've seen overall market bearishness flip to bullishness and a lot of the shorts squeezed out of their positions, it's high time to start looking for signals of a resumption of the bearish trend . One of which is the divergence in price action in the VXX versus the SPY on Friday. Normally, SPY and VXX trade opposite of each other, however, on Friday we saw SPY open higher and close much higher than its open. VXX , on the other hand, opened lower and closed above its opening price. I believe this divergence is as good as any that allows us to take a position with a tight stop:

Buy VXX @ 37.50 or lower
Target: $41.75
Stop: $36.20 (a new low)
Comment: It should be noted that VXX will cease to exist at the end of the month. This trade should be for VXXB, not VXX.
Trade active: VXXB bought this morning under 37.50
Comment: Pretty much a straight line to (almost our target). Feel free to start using a trailing stop here.
Trade closed: target reached: 30 cents away from the target in a very small amount of time. Leaving a small amount on, but closing this trade.
Vxx is replaced by vxxb don't buy vxx
+1 Reply
@HarishRavi, very good point!
@HarishRavi, thanks. I added a comment to the idea.
Excellent technical analysis.
+1 Reply
@gvoommen, thank you!
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