As mentioned before, we’re in somewhat of a boring market nowadays. Regardless of why that exactly may be, I think we can agree that eventually that will come to end. Sooner or later we’ll get to re-experience how it to feels to have our faces ripped off by sudden moves rather than by a slow drip.
I’m sure we all hold different opinions regarding when exactly this may happen – be that ‘before Christmas’, ‘b/w Christmas & the New Year’, or just in 2010 – but I’d like to posit that it will happen sooner than you might think:
1. $VIX at Support
The CBOE’s volatility index has been in a downward trend all year – understandable in light of all the “unknowns” that have been taken out of the market since the “crash” and the 666-bottom. One would expect the $VIX to eventually bottom out (afterall, it cannot go to or too near 0, otherwise we’d truly end up with a flatlined market)…and this process seems to have picked ’20’ as its magic number. Twice in the last 2 months we’ve come within a few hundredths of breaking it. In both cases, failure led to a pullback (with October’s being the more significant):
So, as you can see, we’re just about to butt into that “support” line once again. An expected bounce off this line should bring back some volatility in the form of a change from the established direction/trend (aka. pullback).
2. $CPCI Boredom
Today’s index put:call ratio ($CPCI) reading (1.21) was yet another dud, the eighth in a row, which makes this the longest entry-less streak since late May/early June. Such boredom usually correlates with a boring market…whereas the opposite (multiple entries in a short span) correlates with inflection points (which is what we were experiencing at the beginning of this month). But just as when something is oversold/bought, a reversal is expected sooner or later. And seeing as how the $CPCI is on its longest entry-less streak in 6 month, I’d expect this reversal to come rather quicklike and snap this thing out of its ennui.
On a side-/related-note, the shortest-term $CPCI sma (20-day) dipped below the middle-term sma (125-day) for the first time since April’09, which could give some cause for concerns for all the bulls out there The additional divergence seen after today’s action should reinforce these concerns…
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Despite all of that, I won’t be picking at just puts on Thursday; trying to keep it balanced:
- puts: CMG (@88.50), ESRX (@83.), HON (@40.25), IBB (@78.5),
- calls: AAPL (@198.), CDE (@20.25), FCX (adding @80.30), GDX (@48.75), KBH (@13.86),
We may be off, here.
Always repair to my blog before indulging in leveraged positions in PM’s, btw. I would have warned you off those CDE, GDX calls.
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Both CDE & GDX have fallen way short of my entry points (in the parenthesis)…so no damage done there.
Puts in CMG & IBB are the only ones to get hit so far…
Booking a decent win on MOS puts here…