See my Previous post for more information - in short, I believe it is really about time to start hedging long exposure to the broad U.S. Stock market.
T.A. Arguments: - SPY tested both the massive broken trend line from march 2020 yesterday and got rejected. - This Coincided with a rejection off the upper 1D Bollinger Bands. - The insane long term RSI divergence is still valid. - Trading volume very correlated with the VIX - i.e. higher volume on high-fear (and usually mostly red) days. - VIX has turned up from right below 15 despite new intraday ATH every day. Green VIX on green SPY-days are not a good sign. - (Not shown on chart) money Flow ETF also show a massive divergence, meaning that one USD increase in S&P500 value corresponds to less money invested (more investors are holding the same hand). - (Now shown on chart) Fear and Greed Index - generally a decent contrarian indicator - is about to turn "Extremely Bullish" yet again. - SPY/M2SL is now above its level on February 2020 - a level only seen at that time and at the peak of the DotCom bubble.
Other arguments: - Liquidity crunch from tapering in the U.S., rate hikes from almost every central bank (yes, people from all over the world has contributed to this bubble - not only those directly affected by the U.S. Fed), Potentially forced downturn (debt regulation) due to inflation and default risks. - Potential collapse of the Chinese Property sector and its stakeholders - it seems very odd if this is priced at these levels. - Potential Tether collapse (yes, you heard me right): If most of its 70 Billion USD reserves are (as rumours has it) actually in risky EM (including chinese Property) commercial paper, it is a massive risk for the crypto industry and all the liquidity currently placed there - such an event will be contagious with a high probability.
As I am just a greedy trader, I also want to take advantage of this environment, so I have loaded up on VIX futures (see orange graph). My opinion is that volatility (and hedging in general) is extremely cheap at the moment with respect to the current market state. However, this is a risky move (might even be riskier than holding the SPY), so I do not recommend (or is in any way authorised to recommend) such a move - I just state that I am doing so myself, as you should never lister to someone without skin in the game.
I wish you all well :)
DYOR. NFA.
Neve take the words of others as a given!
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I bought more VIX futures today - because it is the only thing I find reasonable.
I saw the same exact thing, yet is still pushed higher …. Irrational
TheDots
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@Erictaylor, Yes - every financial market is in insane speculation mode right now (and has been for a quite some time). I just trade the VIX and stay out completely, as this will be very ugly at some point - it just has to, because there is nowhere to hide. It is just sad, because everyone is all in and will lose a lot of their savings. The famous Taleb "movie theatre" is getting fuller by the minute.