This is madness! I’m getting long

First, here’s my commentary for Wednesday’s trading, Hawaii Trader style! (That’s me at 1:10 taking out a bull)…

 

Tomorrow (Thursday) should be real interesting.  Whatever happens I will be waiting for another “miracle rally” to setup.  That means we either start off down and break the gap up to day highs, or we just get higher.  Or, I do nothing… and wait for it  to come to me.  For now, I’m leaning to the belief that Sisyphus’ boulder has rolled to the bottom on the short term.

I realize that almost every index  and indicator is against me tomorrow…  futures are down over 100 points, Nikkei down almost -7%, Hang Seng down -4% … but that’s not going to stop me from at least looking now.  A really good place to look, and I’ve pointed this out before, is around early to mid December, before quadruple-witching day.  During this period, volume starts to really pick up.

As for all the technical traders, throw away your charts.  They have not been working.  If they have, then you would have been short this market with me at least since last Thursday.  I’m really getting tired of all the bottom calling, the resistance points, the breakout points blah blah blah.  Those are only important to me on an intraday chart where all the trading action takes place.  There will be a time when we need them, but it’s not now.  

What we need now is to observe one indicator, and that is “fear.”

When the market gets this bloody, money can be made on the street.  I am detecting all kinds of fear… in the blogosphere, in the media, even in my local community… I can’t even get a good workout at the gym without some old farts debating about stock prices.  

Where we stand right now, from a week-to-week perspective, is that what happened in last Thursday’s Miracle Rally (Dow -300 to Dow +500) happened again yesterday except inversely (Dow +100 to Dow -400).  So what do we have?  A washout of the Sisyphean Bulls.

But anyway, here’s my argument for why its tough to short here.  Basically, we have in store for us the great possibility of the next Sisyphus Rally, which I imagine can be a few thousand points in the Dow.  No one believes it, no one sees it, and therefore it’s coming (the heart of a true contrarian).

Now earlier I said, the only indicator important to us right now is fear, so for starters, I give you the $Vix and the “double inverse ETFs”.  No one else has even mentioned it yet, but I’ve been noticing that using the 2x-inverse ETFs (that have significant volume), can be used as a contrarian indicator (3x inverse ETFs are nonsense).  So, although the Vix has been acting “strange-bound” up until the past two days, we at least have the action in the inverse-ETFs to verify fear/panic conditions.  Remember, this does not always result to immediate reversals in trends, but it does serve a high probability that it’s a good idea to cover your shorts or hedge your shorts now.  Here’s my notes…

… There are two scenarios for the Vix that can potentially hurt the bears.  

(1) Vix spikes showing more bull panic:  We already had one “vix spike” that occurred on 11/05 – 11/06 which was a jump from 47.11 to 64.78 (a 37% spike).  Tomorrow, I am hoping we gap down a little so that we can get that second “spike” to the mid 80s.  That would mean +20% move in the Vix in 2 days.  That would be a great spot to get long or hedge your shorts, aka “buy the panic.”

(2) Vix immediately reverses, causing panic buying.

 

… I’ve been starting to use the inverse ETFs as a contrarian indicator.  Its currently just a study, and I have to add more data points to this experiment, but so far, I would not like to open new shorts based on my findings so far.

Aloha to the new twittericious fellahs.  Make sure you follow my friend zStock for a good chart…

 

	julek / j targowski
	zstock
	j0sh1ngU

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