Choppy to lower prices ahead.
1. Low readings on VIX imply that investors are complacent. A spike in VIX up 5 points would create a tradable bottom for 3-5 days.
2. Crude Oil is at the high end of its historical range and it has a lagged, negative effect on the overall stock market.
3. The long slide in metals, specifically silver , shows that investors have thrown away their silver together with their bonds. After stocks outperform relative to metals, it is wise to expect a different tune for at least a month or two.
4. yields are at their lowest levels in 20 years relative to 12-month trailing returns on assets in the S&P500 . The median return on the S&P500 is roughly a 3.5% return on assets. That is not worth taking the risk of a 20%-40% decline the value of your holdings in order to return 3.5%. More on this in later updates.
I wish I could tighten the stop closer, but using roughly 3 average daily trading ranges is about as tight as I am comfortable with. If we see a spike up in VIX of 5 points, I would recommend cutting the short position and re-positioning on a bounce.
Tim 2:15 PM EST, Wednesday, August 14, 2013
PS - I put an alarm on my phone that rings to alert me each trading day just before the close, just in case I am away from the market or get side-tracked. Hope this helps.