Bought a Little More UVXY

218 views

Recognizing that equity tops/volatility bottoms are processes and not events, I scaled into a little more UVXY to bring my cost basis below $10.  While I await the bottom in vol, I will opportunistically add a little UVXY each time the daily $VIX stochastics get into the single digits near the close, which they did today.  UVXY is now 4% of my capital at cost basis ($9.75).

The Interest Rate Cycle & Equities

309 views

 

Inserted above is a chart which shows the last few interest rate cycles (10-Yr/2-Yr Treasury Spread) relative to the S&P500.  Note how the interest rate cycle bottoms coincide with tops in equities.  ZIRP is distorting the short end of the Treasury curve so absent a 2008-type panic it’s darn near impossible to get the yield curve any flatter (ie, the spread any tighter/lower).  While Fly and others watch for rising interest rates on the long end of the curve (ie, lower TLT) as a sign that equities are headed higher, the widening of the spread via higher rates on the long-end hasn’t in the past traditionally portended higher equities.

Sold AGQ

151 views

Sold 100% of my AGQ that I bought in May.  Break-even on the trade after 3 months.  Silver looks to be on a slow road to nowhere.  Was tempted to take a very small portion of the proceeds and average down in UVXY but I won’t, for now.

Will the $RUT Descending Triangle Save the Small Cap Shorts

223 views

Small cap shorts are being beaten like red-headed stepchildren today.  A glimmer of hope for small cap shorts remains in the form of a descending triangle on the daily $RUT chart (see above courtesy of stockcharts.com).  The triangle works to $RUT 720 if valid.

 

Small Cap Longs Prepare for the Dirt Nap

122 views

Small caps closed out at the lows of the day after the Bernank did his best Merlin imitation and poofed away any illusions of endless lines of QE3 cocaine on a mirror just waiting to be snorted by market gorillas.  We have been in a confirmed downtrend on $RUT since the 3/26 closing highs;

  • 3/26 $RUT closing high 846.13,
  • 4/10 $RUT closing low 784.15 (lower low than the 3/06 closing low of 787.09),
  • 4/27 $RUT closing high 825.47 (lower high than the 3/26 closing high),
  • 6/04 $RUT closing low 737.24 (lower than the 4/10 closing low),
  • 7/03 $RUT closing high 818.48 (lower than the 4/27 closing high)

With $RUT on the verge of a death cross I fully expect small caps to make a lower closing low than the 6/04 closing low of 737.24 and continue the downtrend.

Ursine Stampede

102 views

Based on the last 2 days of trading, it appears we’ve got a selling stampede just getting started.  The start of a selling stampede is marked by 2 consecutive days of NYSE internals greater than or equal to 2:1 on both decliners:advancers and down volume:up volume.  Taken together, this past Friday and today met this criteria.  After the first couple of days of bad internals and heavy selling the indexes experience a 2 to 3 day throwback rally.  Given that tomorrow is Turnaround Tuesday I personally would like to see an up open that gets sold off during the day and a down close.

Since the beginning of the secular bear market in 2000, I can count 29 selling stampedes.  The average stampede;

  • Shows a loss of 3.4% in $SPX during the first 2 days,
  • Hits a trough of -11.8% on $SPX from the closing price on Day 0,
  • Reaches the trough $SPX value 18 trading days into the stampede,
  • Ages to 22 trading sessions before beginning the 2-day rally that marks the end of the stampede,
  • Sees $SPX tack on 3.9% during the 2-day rally that marks the end of the stampede.

Both $SPX and $COMPQ appear to me to be setting up for the next leg down from their respective April 2012 peaks so I don’t expect this to be the last selling stampede of the year.  Further, I expect $SPX and $COMPQ to put in lower lows during this stampede and confirm their downtrends.  $RUT is already in a confirmed downtrend and is showing the way for reduced risk appetite of market participants.  Therefore, I will continue to hold my TZA, TVIX and UVXY.

Be that as it may, towards the end of this selling stampede I am going to look for some long call option plays for short squeezes.  Using The PPT, I will screen for Hybrid Score >2.5 and Short as % of Float >20%.  I’ve run this screen a couple of times since becoming a PPT member a few weeks ago.  I noted that long calls in ZNGA, LEAP and NIHD appeared to offer attractive risk/reward setups.   Sure enough, ZNGA and LEAP held their own today (ZNGA was up nicely, actually) with only NIHD misbehaving.

Best to your trading.

Make Mine a Double

326 views

Top, that is.  See the S&P chart below (courtesy of stockcharts.com) for a nicely formed double top at 1,375ish.

The Nasdaq Composite has a similar looking double top formation on its chart.  The Russell could not make it back to its early July high and is instead setting up what appears to be a bear flag.  Perhaps my patience in waiting out my short $RUT / long vol trade is about to pay off?

Averaging Down

140 views

Bought a little more UVXY a few minutes ago.  I am scaling in very, very slowly.  UVXY is ~3% of my capital at cost basis (which is now $10.64).

Bought A Little UVXY

152 views

Another Turnaround Tuesday is upon us.  I know I said earlier that I would hold off on buying any more UVXY and TZA until Autumn.  But, long vol is just too cheap and too tempting down here.  So I added a little UVXY to lower my average cost.

Best Case Scenario

146 views

Monday and Thursday of this past week I bought back some of the TNA that I had profitably sold the day prior to the Fed meeting announcement.  Not all of it, but some of it and I still hold it.  I also still have the long July 58 TNA calls I bought on 5/16, the long July 60 TNA calls I bought on 6/1 and the long October 75 TNA calls I bought on 6/20. 

I am positioned to benefit from a continued move higher on $RUT.  Though I would benefit more from a move lower in $RUT and a move higher in $VIX.  Given the choice I would gladly forego the smaller profits available to me being long TNA and long a legacy URTY position (which I am almost completely out of)…and AGQ and UCO (more on that later)…in favor of the larger profits that I would make on my long  TZA, TVIX and UVXY positions.  To that end, a Monday trend day lower below $RUT 780 (ie, a bull trap) would be welcomed.  A very low probability event I must admit.  A more likely event would be sideways to slightly down action on Monday and Tuesday of this coming week.  Then an $RUT close in the 780’s on Thursday followed by a Friday morning gap down open below $RUT 770 and trend day lower on a baaad (sic) jobs report with follow through to the downside the next Monday would put into place a pretty solid island top.  This would trap a whole bunch of longs and really get the party started to the downside.  My heart tells me that $RUT/$VIX should be lower/higher.  My head tells me the $20B = 1% thesis is correct and $RUT/$VIX will continue to move higher/lower.

I’m back in the black on the long AGQ shares I bought on 5/16.  I need $WTIC to get back to about $90 to get to break even on the long UCO shares I bought the last 2 weeks of May.  I would love nothing more than to wake up one day this week to the news that Israel has bombed Iran and $WTIC has spiked to $200 as a result.  An oil spike of that magnitude would also kill the equity markets and make $VIX act like it has mainlined an uncut kilo of gorilla cocaine.

For the time being I plan to hold what I’ve got.  I will resume my scale-in campaign on TZA and UVXY should we get evidence next week that Friday’s move was only a bull trap.  If not, I will suspend said campaign until Autumn.

Bought a Little More UVXY

218 views

Recognizing that equity tops/volatility bottoms are processes and not events, I scaled into a little more UVXY to bring my cost basis below $10.  While I await the bottom in vol, I will opportunistically add a little UVXY each time the daily $VIX stochastics get into the single digits near the close, which they did today.  UVXY is now 4% of my capital at cost basis ($9.75).

The Interest Rate Cycle & Equities

309 views

 

Inserted above is a chart which shows the last few interest rate cycles (10-Yr/2-Yr Treasury Spread) relative to the S&P500.  Note how the interest rate cycle bottoms coincide with tops in equities.  ZIRP is distorting the short end of the Treasury curve so absent a 2008-type panic it’s darn near impossible to get the yield curve any flatter (ie, the spread any tighter/lower).  While Fly and others watch for rising interest rates on the long end of the curve (ie, lower TLT) as a sign that equities are headed higher, the widening of the spread via higher rates on the long-end hasn’t in the past traditionally portended higher equities.

Sold AGQ

151 views

Sold 100% of my AGQ that I bought in May.  Break-even on the trade after 3 months.  Silver looks to be on a slow road to nowhere.  Was tempted to take a very small portion of the proceeds and average down in UVXY but I won’t, for now.

Will the $RUT Descending Triangle Save the Small Cap Shorts

223 views

Small cap shorts are being beaten like red-headed stepchildren today.  A glimmer of hope for small cap shorts remains in the form of a descending triangle on the daily $RUT chart (see above courtesy of stockcharts.com).  The triangle works to $RUT 720 if valid.

 

Small Cap Longs Prepare for the Dirt Nap

122 views

Small caps closed out at the lows of the day after the Bernank did his best Merlin imitation and poofed away any illusions of endless lines of QE3 cocaine on a mirror just waiting to be snorted by market gorillas.  We have been in a confirmed downtrend on $RUT since the 3/26 closing highs;

  • 3/26 $RUT closing high 846.13,
  • 4/10 $RUT closing low 784.15 (lower low than the 3/06 closing low of 787.09),
  • 4/27 $RUT closing high 825.47 (lower high than the 3/26 closing high),
  • 6/04 $RUT closing low 737.24 (lower than the 4/10 closing low),
  • 7/03 $RUT closing high 818.48 (lower than the 4/27 closing high)

With $RUT on the verge of a death cross I fully expect small caps to make a lower closing low than the 6/04 closing low of 737.24 and continue the downtrend.

Ursine Stampede

102 views

Based on the last 2 days of trading, it appears we’ve got a selling stampede just getting started.  The start of a selling stampede is marked by 2 consecutive days of NYSE internals greater than or equal to 2:1 on both decliners:advancers and down volume:up volume.  Taken together, this past Friday and today met this criteria.  After the first couple of days of bad internals and heavy selling the indexes experience a 2 to 3 day throwback rally.  Given that tomorrow is Turnaround Tuesday I personally would like to see an up open that gets sold off during the day and a down close.

Since the beginning of the secular bear market in 2000, I can count 29 selling stampedes.  The average stampede;

  • Shows a loss of 3.4% in $SPX during the first 2 days,
  • Hits a trough of -11.8% on $SPX from the closing price on Day 0,
  • Reaches the trough $SPX value 18 trading days into the stampede,
  • Ages to 22 trading sessions before beginning the 2-day rally that marks the end of the stampede,
  • Sees $SPX tack on 3.9% during the 2-day rally that marks the end of the stampede.

Both $SPX and $COMPQ appear to me to be setting up for the next leg down from their respective April 2012 peaks so I don’t expect this to be the last selling stampede of the year.  Further, I expect $SPX and $COMPQ to put in lower lows during this stampede and confirm their downtrends.  $RUT is already in a confirmed downtrend and is showing the way for reduced risk appetite of market participants.  Therefore, I will continue to hold my TZA, TVIX and UVXY.

Be that as it may, towards the end of this selling stampede I am going to look for some long call option plays for short squeezes.  Using The PPT, I will screen for Hybrid Score >2.5 and Short as % of Float >20%.  I’ve run this screen a couple of times since becoming a PPT member a few weeks ago.  I noted that long calls in ZNGA, LEAP and NIHD appeared to offer attractive risk/reward setups.   Sure enough, ZNGA and LEAP held their own today (ZNGA was up nicely, actually) with only NIHD misbehaving.

Best to your trading.

Make Mine a Double

326 views

Top, that is.  See the S&P chart below (courtesy of stockcharts.com) for a nicely formed double top at 1,375ish.

The Nasdaq Composite has a similar looking double top formation on its chart.  The Russell could not make it back to its early July high and is instead setting up what appears to be a bear flag.  Perhaps my patience in waiting out my short $RUT / long vol trade is about to pay off?

Averaging Down

140 views

Bought a little more UVXY a few minutes ago.  I am scaling in very, very slowly.  UVXY is ~3% of my capital at cost basis (which is now $10.64).

Bought A Little UVXY

152 views

Another Turnaround Tuesday is upon us.  I know I said earlier that I would hold off on buying any more UVXY and TZA until Autumn.  But, long vol is just too cheap and too tempting down here.  So I added a little UVXY to lower my average cost.

Best Case Scenario

146 views

Monday and Thursday of this past week I bought back some of the TNA that I had profitably sold the day prior to the Fed meeting announcement.  Not all of it, but some of it and I still hold it.  I also still have the long July 58 TNA calls I bought on 5/16, the long July 60 TNA calls I bought on 6/1 and the long October 75 TNA calls I bought on 6/20. 

I am positioned to benefit from a continued move higher on $RUT.  Though I would benefit more from a move lower in $RUT and a move higher in $VIX.  Given the choice I would gladly forego the smaller profits available to me being long TNA and long a legacy URTY position (which I am almost completely out of)…and AGQ and UCO (more on that later)…in favor of the larger profits that I would make on my long  TZA, TVIX and UVXY positions.  To that end, a Monday trend day lower below $RUT 780 (ie, a bull trap) would be welcomed.  A very low probability event I must admit.  A more likely event would be sideways to slightly down action on Monday and Tuesday of this coming week.  Then an $RUT close in the 780’s on Thursday followed by a Friday morning gap down open below $RUT 770 and trend day lower on a baaad (sic) jobs report with follow through to the downside the next Monday would put into place a pretty solid island top.  This would trap a whole bunch of longs and really get the party started to the downside.  My heart tells me that $RUT/$VIX should be lower/higher.  My head tells me the $20B = 1% thesis is correct and $RUT/$VIX will continue to move higher/lower.

I’m back in the black on the long AGQ shares I bought on 5/16.  I need $WTIC to get back to about $90 to get to break even on the long UCO shares I bought the last 2 weeks of May.  I would love nothing more than to wake up one day this week to the news that Israel has bombed Iran and $WTIC has spiked to $200 as a result.  An oil spike of that magnitude would also kill the equity markets and make $VIX act like it has mainlined an uncut kilo of gorilla cocaine.

For the time being I plan to hold what I’ve got.  I will resume my scale-in campaign on TZA and UVXY should we get evidence next week that Friday’s move was only a bull trap.  If not, I will suspend said campaign until Autumn.