Bought back a little more of the TNA shares I had bought in May and sold the day before the Fed meeting announcement. Hedging my TZA/TVIX/UVXY holdings.
$SPX, $COMPQ and $RUT are all three trading between their converging 50-day and 200-day moving averages. There will be a breakout one way or the other. It seems that all this back-and-forth is designed to ensure the fewest participants are on-board for the escalator going up or the elevator going down.
I find myself in an indecisive mood today.
On the one hand, the $20B = 1% thesis tells me that stocks are likely headed higher for the duration of the the newly extended Operation Twist which means the duration of 2012. Today’s uplift in equities seems to indicate the correctness of this line of thinking.
On the other hand, $Silver and $WTIC are on a long, slow road to nowhere which would seem to indicate that the influx of liquidity via extended Twist has already been discounted and QE3 is not forthcoming any time soon. Today’s uplift in equities could be nothing more than end-of-quarter window dressing.
While equities are up nicely, $VIX is flat and acting in a very tame manner. I would have expencted $VIX to be down a lot today given the upside rip in equities. So maybe this is the tell I should be paying attention to. Therefore, later this afternnon before the close I am inclined to liquidate more of my legacy URTY position and add a little to my UVXY and TZA positions.
*Update – I did indeud (sic) sell some URTY and buy a little UVXY and TZA about 10 minutes before the closing bell.
Last Tuesday I sold 100% of the TNA shares I had bought in May. Today I bought back a little of those TNA shares. I will buy more on $RUT weakness. More $RUT weakness would welcome as it will put me further into the black on my TVIX, UVXY and TZA holdings which I am inclined to liquidate in light of the $20B = 1% thesis. More $RUT weakness would also allow me to average down into more TNA.
If you haven’t read Tony Caldaro’s weekend update on his Objective Elliot Wave blog you should (Teahouse on the Tracks often quotes Tony). I’ve been a regular visitor to Tony’s blog since summer of 2007 when he was calling for a major top and drop in the stock market. At the time I thought he was nuts. Then the top and drop happened and I started paying more attention. Tony was also correct when he wrote in the waning months of 2008 that we were near the end of the bear market.
In his weekend update, Tony writes about an interesting pattern he has found. The pattern being that for every $20B in liquidity the Fed provides (via QE or Twist) there is a 1% rise in the S&P. Tony’s outlook going back for a while now has been that the S&P will make new all-time highs in 2013 and then begin a brutal downtrend that should end the secular bear market we’ve been in since 2000. Tony makes the case, using his $20B = 1% thesis, that the extension of Operation Twist until the end of the year with an additional $267B will take the S&P up to the area between 1,536 and 1,556 (about 15% higher from Friday’s close). The all-time closing high for the S&P is 1,565 in October 2007. But first, Tony thinks the S&P may get down to around 1,267 if the 100-pt pullback that greeted the introduction of Operation Twist repeats itself upon the extension of Operation Twist.
On average for every 1% the S&P rallies, $RUT rallies 1.05%. Extrapolating the 15% S&P rally that Tony writes is coming means $RUT should rally 16% to around 900.
I won’t repeat his analysis here as you should go read it for yourself. It’s definitely food for thought. It has got me thinking that maybe the golden cross in $VIX and the attending upside explosion in volatility is further off than I had anticipated. Maybe I should suspend my campaign to get short $RUT and long $VIX until later this year when we are closer to the end of Operation Twist? If Tony is correct, it would certainly make for a more attractive entry point for short $RUT and long $VIX. And maybe I should be scaling into TNA over the next couple of weeks with an eye towards hitting the exit close to the end of this year? A 16% ride on the $RUT escalator going up for the next 5 months would be nice (more since my escalator of choice would be TNA).
I can’t imagine anybody wanting to be long into this weekend. So I don’t think this up/down day for equities/vol will last into the close. Therefore, I am tempted to scoop up some more VXX options (the December 38’s) and more UVXY shares (cost basis = $12.35 for the shares I already have). Mind you, though, while I commented on today’s vol pullback being the spark for my interest in scooping today that long vol is a position trade for me and not a day trade. Every day brings us closer to the inevitable upside explosion in volatility that I have been anticipating for a few weeks now.
I also share Fly’s sentiment regarding $Silver. AGQ has pulled back to my cost basis ($37.95) for the shares I picked up in May. I will buy more if $SILVER pulls back some more today or next week.
Speaking of $SILVER (and I’ll throw in $WTIC), the biggest lesson I learned this week is to tune out all the noise when it comes to QE and to instead pay attention to metals and oil. If metals and oil are not moving up (which they most definitely were not last week and Monday and Tuesday of this week) prior to a supposed announcement of QE then the odds are very much stacked against said QE announcement being a reality.
*Update: Pulled the trigger and bought a couple of VXX calls (December 38’s) and some UVXY shares.
It would seem to be the case judging by the Coppock Curve on $RUT. The Coppock Curve was created by E.S.C. Coppock in 1962. Mr. Coppock was asked by the Episcopal Church to identify buying opportunities for long-term investors. He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.
The Coppock Curve, using month-end values, calculates the sum of the 11-month moving average and the 14-month moving average to generate a value and then weights values for the last 10 months to generate the current month’s value. The weighted value of the Curve oscillates above and below the zero line. The original intent of the Coppock Curve as an indicator was as a buy signal only. Said buy signal considered to have been generated when the Curve moves up from a trough. For my purposes, not so much that a sell signal is given but that a downtrend is confirmed when the value of the Curve moves below the zero line.
The Coppock Curve moved below the zero line as of the end of May and, if yesterday’s $RUT close were used for the end of month value for June, would continue lower despite the June rally. Since the inception of $RUT, there have been 4 other occasion when the Coppock Curve for $RUT has moved below the zero line;
August 1990 – $RUT close at 139.51 on 8/31/90 and hit a low of 118.82 on 10/30/90. The $RUT low occurred 60 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out 14.8% below the end of August closing value.
November 1998 – $RUT close at 397.75 on 11/30/98 and hit a low of 383.37 on 3/23/99. The $RUT low occurred 113 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out only 3.6% below the end of November 2008 closing value.
April 2001 – $RUT close at 485.32 on 4/30/01 and hit a low of 327.04 on 10/9/02. The $RUT low occurred 527 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out 32.6% below the end of April 2001 closing value.
February 2008 – $RUT close at 686.18 on 2/29/08 and hit a low of 343.26 on 3/9/09. The $RUT low occurred 374 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out 50.0% below the end of February 2008 closing value.
I do not use the Coppock Curve as a stand-alone indicator. But, given the track record of confirming downtrends, I do feel more comfortable in my short equities/long vol holdings given the recent move of the $RUT Coppock Curve below the zero line.
Earlier this morning I bought some calls.
Bought some VXX calls September expirations $27 strikes and some TZA calls October expirations $39 strikes. If we don’t get QE3 today then we will get the upside explosion in $VIX that I’ve been anticipating the last few weeks and it will be a seller’s market in equities.
Bought some TNA October $75 strikes. If we do get QE3 today then, as Fly has stated, it will be escalator going up for equities for at least the next 20 weeks.
As it relates to QE3, today’s call buying was to set me up to get some gains regardless of what happens today at 12:30pm Eastern. The gains on VXX and TZA should more than cover the worthless expiration of TNA and vice-versa. Only a sideways market until Fall would make me lose money on these options.
Before the close today I will be selling the TNA shares I had bought in May in anticipation of the rally. I still have 100% of them and will be selling 100% of them. I will hang on to the long TNA calls I had bought in May alongside the TNA shares. The TNA calls (July expiration) were a small capital commitment and hanging on to them let’s me stay in the pot regardless of what happens tomorrow at 12:30pm Eastern.
Before the close today, I will also be selling more of the legacy URTY position from last Autumn and buying more TZA and UVXY. UVXY rather than TVIX given the former’s more favorable position relative to NAV as compared to the latter.
The TZA, TVIX and UVXY positions I have are very small still. I am only a few weeks into an 8-week scale-in campaign. If we get QE3 tomorrow….I don’t think we do, but if we do….I may sell all or some of my TZA, TVIX and UVXY but I will definitely be buying back the TNA shares and will add more TNA calls (October expiration).
I bought some UVXY on today’s pullback in vol. Please know that I am buying in such small increments that it will take me another 6 weeks to fill out my position. Should we get the golden cross in $VIX before the next 6weeks are up I shall be contented with a partial long vol position.
The only thing that will dissuade me in my campaign to get long vol would be QE3 or its equivalent. Should we get an announcement of more QE, I can dump the long vol shares I have and not suffer a big hit whilst I plunge into long TNA shares and TNA calls.
As happens every time futures expire, as they did last Friday, TVIX and UVXY trade at a discount to their NAV due to the expiration of front-month $VIX futures. As of Friday’s close, TVIX traded at $7.19, which was a 13% premium to its end-of-day NAV of $6.34. As of Friday’s close, UVXY traded at $15.18, which was a premium of 5% to its end-of-day NAV of $14.44. As of this morning at 10:30 Eastern, both traded at a discount to NAV. If today’s pullback in vol holds into the close, I will be getting long more vol. Given the TVIX NAV fiasco of earlier this year, I am going to switch things up a bit and will start buying UVXY for my long vol positions given its position as of Friday relative to its NAV. Meanwhile I will watch to see how TVIX trades around its NAV over the next week or so.
Long calls on VXX are also in the playbook for my long vol position. However, I am holding off on adding VXX calls until we get closer to the golden cross on $VIX.
Bought back a little more of the TNA shares I had bought in May and sold the day before the Fed meeting announcement. Hedging my TZA/TVIX/UVXY holdings.
$SPX, $COMPQ and $RUT are all three trading between their converging 50-day and 200-day moving averages. There will be a breakout one way or the other. It seems that all this back-and-forth is designed to ensure the fewest participants are on-board for the escalator going up or the elevator going down.
I find myself in an indecisive mood today.
On the one hand, the $20B = 1% thesis tells me that stocks are likely headed higher for the duration of the the newly extended Operation Twist which means the duration of 2012. Today’s uplift in equities seems to indicate the correctness of this line of thinking.
On the other hand, $Silver and $WTIC are on a long, slow road to nowhere which would seem to indicate that the influx of liquidity via extended Twist has already been discounted and QE3 is not forthcoming any time soon. Today’s uplift in equities could be nothing more than end-of-quarter window dressing.
While equities are up nicely, $VIX is flat and acting in a very tame manner. I would have expencted $VIX to be down a lot today given the upside rip in equities. So maybe this is the tell I should be paying attention to. Therefore, later this afternnon before the close I am inclined to liquidate more of my legacy URTY position and add a little to my UVXY and TZA positions.
*Update – I did indeud (sic) sell some URTY and buy a little UVXY and TZA about 10 minutes before the closing bell.
Last Tuesday I sold 100% of the TNA shares I had bought in May. Today I bought back a little of those TNA shares. I will buy more on $RUT weakness. More $RUT weakness would welcome as it will put me further into the black on my TVIX, UVXY and TZA holdings which I am inclined to liquidate in light of the $20B = 1% thesis. More $RUT weakness would also allow me to average down into more TNA.
If you haven’t read Tony Caldaro’s weekend update on his Objective Elliot Wave blog you should (Teahouse on the Tracks often quotes Tony). I’ve been a regular visitor to Tony’s blog since summer of 2007 when he was calling for a major top and drop in the stock market. At the time I thought he was nuts. Then the top and drop happened and I started paying more attention. Tony was also correct when he wrote in the waning months of 2008 that we were near the end of the bear market.
In his weekend update, Tony writes about an interesting pattern he has found. The pattern being that for every $20B in liquidity the Fed provides (via QE or Twist) there is a 1% rise in the S&P. Tony’s outlook going back for a while now has been that the S&P will make new all-time highs in 2013 and then begin a brutal downtrend that should end the secular bear market we’ve been in since 2000. Tony makes the case, using his $20B = 1% thesis, that the extension of Operation Twist until the end of the year with an additional $267B will take the S&P up to the area between 1,536 and 1,556 (about 15% higher from Friday’s close). The all-time closing high for the S&P is 1,565 in October 2007. But first, Tony thinks the S&P may get down to around 1,267 if the 100-pt pullback that greeted the introduction of Operation Twist repeats itself upon the extension of Operation Twist.
On average for every 1% the S&P rallies, $RUT rallies 1.05%. Extrapolating the 15% S&P rally that Tony writes is coming means $RUT should rally 16% to around 900.
I won’t repeat his analysis here as you should go read it for yourself. It’s definitely food for thought. It has got me thinking that maybe the golden cross in $VIX and the attending upside explosion in volatility is further off than I had anticipated. Maybe I should suspend my campaign to get short $RUT and long $VIX until later this year when we are closer to the end of Operation Twist? If Tony is correct, it would certainly make for a more attractive entry point for short $RUT and long $VIX. And maybe I should be scaling into TNA over the next couple of weeks with an eye towards hitting the exit close to the end of this year? A 16% ride on the $RUT escalator going up for the next 5 months would be nice (more since my escalator of choice would be TNA).
I can’t imagine anybody wanting to be long into this weekend. So I don’t think this up/down day for equities/vol will last into the close. Therefore, I am tempted to scoop up some more VXX options (the December 38’s) and more UVXY shares (cost basis = $12.35 for the shares I already have). Mind you, though, while I commented on today’s vol pullback being the spark for my interest in scooping today that long vol is a position trade for me and not a day trade. Every day brings us closer to the inevitable upside explosion in volatility that I have been anticipating for a few weeks now.
I also share Fly’s sentiment regarding $Silver. AGQ has pulled back to my cost basis ($37.95) for the shares I picked up in May. I will buy more if $SILVER pulls back some more today or next week.
Speaking of $SILVER (and I’ll throw in $WTIC), the biggest lesson I learned this week is to tune out all the noise when it comes to QE and to instead pay attention to metals and oil. If metals and oil are not moving up (which they most definitely were not last week and Monday and Tuesday of this week) prior to a supposed announcement of QE then the odds are very much stacked against said QE announcement being a reality.
*Update: Pulled the trigger and bought a couple of VXX calls (December 38’s) and some UVXY shares.
It would seem to be the case judging by the Coppock Curve on $RUT. The Coppock Curve was created by E.S.C. Coppock in 1962. Mr. Coppock was asked by the Episcopal Church to identify buying opportunities for long-term investors. He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.
The Coppock Curve, using month-end values, calculates the sum of the 11-month moving average and the 14-month moving average to generate a value and then weights values for the last 10 months to generate the current month’s value. The weighted value of the Curve oscillates above and below the zero line. The original intent of the Coppock Curve as an indicator was as a buy signal only. Said buy signal considered to have been generated when the Curve moves up from a trough. For my purposes, not so much that a sell signal is given but that a downtrend is confirmed when the value of the Curve moves below the zero line.
The Coppock Curve moved below the zero line as of the end of May and, if yesterday’s $RUT close were used for the end of month value for June, would continue lower despite the June rally. Since the inception of $RUT, there have been 4 other occasion when the Coppock Curve for $RUT has moved below the zero line;
August 1990 – $RUT close at 139.51 on 8/31/90 and hit a low of 118.82 on 10/30/90. The $RUT low occurred 60 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out 14.8% below the end of August closing value.
November 1998 – $RUT close at 397.75 on 11/30/98 and hit a low of 383.37 on 3/23/99. The $RUT low occurred 113 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out only 3.6% below the end of November 2008 closing value.
April 2001 – $RUT close at 485.32 on 4/30/01 and hit a low of 327.04 on 10/9/02. The $RUT low occurred 527 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out 32.6% below the end of April 2001 closing value.
February 2008 – $RUT close at 686.18 on 2/29/08 and hit a low of 343.26 on 3/9/09. The $RUT low occurred 374 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out 50.0% below the end of February 2008 closing value.
I do not use the Coppock Curve as a stand-alone indicator. But, given the track record of confirming downtrends, I do feel more comfortable in my short equities/long vol holdings given the recent move of the $RUT Coppock Curve below the zero line.
Earlier this morning I bought some calls.
Bought some VXX calls September expirations $27 strikes and some TZA calls October expirations $39 strikes. If we don’t get QE3 today then we will get the upside explosion in $VIX that I’ve been anticipating the last few weeks and it will be a seller’s market in equities.
Bought some TNA October $75 strikes. If we do get QE3 today then, as Fly has stated, it will be escalator going up for equities for at least the next 20 weeks.
As it relates to QE3, today’s call buying was to set me up to get some gains regardless of what happens today at 12:30pm Eastern. The gains on VXX and TZA should more than cover the worthless expiration of TNA and vice-versa. Only a sideways market until Fall would make me lose money on these options.
Before the close today I will be selling the TNA shares I had bought in May in anticipation of the rally. I still have 100% of them and will be selling 100% of them. I will hang on to the long TNA calls I had bought in May alongside the TNA shares. The TNA calls (July expiration) were a small capital commitment and hanging on to them let’s me stay in the pot regardless of what happens tomorrow at 12:30pm Eastern.
Before the close today, I will also be selling more of the legacy URTY position from last Autumn and buying more TZA and UVXY. UVXY rather than TVIX given the former’s more favorable position relative to NAV as compared to the latter.
The TZA, TVIX and UVXY positions I have are very small still. I am only a few weeks into an 8-week scale-in campaign. If we get QE3 tomorrow….I don’t think we do, but if we do….I may sell all or some of my TZA, TVIX and UVXY but I will definitely be buying back the TNA shares and will add more TNA calls (October expiration).
I bought some UVXY on today’s pullback in vol. Please know that I am buying in such small increments that it will take me another 6 weeks to fill out my position. Should we get the golden cross in $VIX before the next 6weeks are up I shall be contented with a partial long vol position.
The only thing that will dissuade me in my campaign to get long vol would be QE3 or its equivalent. Should we get an announcement of more QE, I can dump the long vol shares I have and not suffer a big hit whilst I plunge into long TNA shares and TNA calls.
As happens every time futures expire, as they did last Friday, TVIX and UVXY trade at a discount to their NAV due to the expiration of front-month $VIX futures. As of Friday’s close, TVIX traded at $7.19, which was a 13% premium to its end-of-day NAV of $6.34. As of Friday’s close, UVXY traded at $15.18, which was a premium of 5% to its end-of-day NAV of $14.44. As of this morning at 10:30 Eastern, both traded at a discount to NAV. If today’s pullback in vol holds into the close, I will be getting long more vol. Given the TVIX NAV fiasco of earlier this year, I am going to switch things up a bit and will start buying UVXY for my long vol positions given its position as of Friday relative to its NAV. Meanwhile I will watch to see how TVIX trades around its NAV over the next week or so.
Long calls on VXX are also in the playbook for my long vol position. However, I am holding off on adding VXX calls until we get closer to the golden cross on $VIX.
