Where’s my Panic Spike?!
Well, if you’ve been following me yesterday, I made a bold and traitorous move in going against my Vix indicator. As you know, I always search for a Vix “spike” to determine that a reversal in market trend is near.
Anyway, there was virtually no “spike” in the Vix all day intraday on Thursday, which is normally not a good sign for the bulls. I mean, there was blood all over the tape, but no significant panic! That kind of action translates into hopefulness in the bull camp, or complacency, or perhaps heroics. As a result, the Dow shut down every single rally attempt intraday. So yeah, that’s how you normally would play the Vix-spike indicator. No spike, then keep shorting aggressive…
However, my trader instincts told me to forget that Spike rule, just this once, because what’s been happening lately has been expectedly unpredictable (is that an oxymoron?). In other words, its been so crazy out there that I decided to go contrarian on my contrarian plays, or as Alphadogg would put it, get Costanza on your Constanza plays… would that be reverse trader psychology? Okay, I’m losing you…
Anyway, what I’m saying is, normally I would not cover shorts and buy some longs unless I get a Vix spike up, but I decided to make those moves on Thursday anyway. But this time, I don’t know, its just a feeling, a trader’s instinct, that even though we are in for some ugly employment numbers tomorrow, I just don’t want to be short. I feel very few people share this sentiment with me heading into the weekend after that nast 2-day near 1,000 point drop in the Dow (except Mac and Danny).
Its me versus my own Vix indicator. Discipline versus instinct. Man versus machine. Kasparov versus Deep Blue. Should I sacrifice my queen for two rooks? Lets see what happens tomorrow.
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That was the quite an incoherent yet lucid (is that an oxymoron?) post. I have the same feeling since everyone expects bad numbers and a negative reaction. The market as we know just loves that. Good luck Gio.
I read you writings all the time. I learn alot from you. I appreciate you sharing your thoughts … the whole gammot i.e., your TA, instincts, strategies, psychology, hunches, etc.
Gio,
I am getting the same feeling you are. Right now the futures are up premarket. For those who haven’t done so already, this is a time to trim or cut all shorts loose and look for relative strength stocks for a potential general market trend change. One scenario I’m looking for is for the market to go from premarket positive to negative (to fake out mom and pop), then, positive. Today is fairly important in how the market reacts to what will certainly be a horrible number.
One must be flexible in this market, however. The variables seem to be lining up for a positive setup, but we’ve all seen crazy stuff happen in this market. The fact remains that the fundamentals are going from horrible to nightmarish prety quickly. If we plunge lower, below 8200, I won’t be short (I only have 1 short left and I’m covering it this morning), but I will look for retraces in the following days (to the 8250-8500) to go short.
Good luck to all.
sound confusd a little
El Zilco,
I’m having my best trading year ever. Gio, it seems, has been doing well as well. The key in this market, IMHO, is the following:
1) Have an open mind
2) Expect the unexpected
3) Sell rips into previously established resistance
4) Buy dips into previously established support
5) Reduce normal position sizing and be more nimble
6) Avoid breakouts or breakdowns (momentum trades) — mean convergence is the strategy here
Hope that helps,
Phil
I think with Dow almost 1000 points down in two days, more and more people are afraid to go short – that’s the reason I didn’t go for any short positions yesterday and i also think that market will get some sort of bounce today. BTW, nice call on that solar fade!
It is starting to get creepy here. We all can’t expect a rally today. Now, the unexpected rally trade is getting crowded!
Phil,
That’s a great summary.
Another nice call…..I think we might test the recent highs again…1000 S&P
Another must read post. Thanks for your thoughts. So far, looks as though going Costanza on your Costanza is working out.
Your posts are great Gio. I dumped my TZA yesterday and my BGZ at open, locking in strong gains. I also grabbed a block of BGU at open, which is doing well but I may blow out of before Obama’s 2pm speech. Although the market still climbs today despite bad news, as it did for several days preceding the election.
Whoa. All the bad news today and the market still continues to proceed. It’s like Achilles wading through the battlefield – a cut here and there but nothing that can cause real damage.
thanks for contributing guys.
Phil pretty much nailed it on how to trade this market with a cool head. Be in control!
There’s a lot of wedge patterns on a lot of stocks, including the inverse ETFs as the Dow trades at +150. That means the market can move big in either direction from here near to the close.
Right now I’m watching the Vix, which is forming an intraday bottom. however, a break under 57.46 = short the inverse ETFs. a bounce on that = long inverse ETFs or solars.
Anyone have any longs on their list for a day trade?
I like the rally today Gio but the stocks I have been watching that have held up well the past two days (LHCG, ESI, CBST, VASC, ISYS, DV, SYNA) are doing absolutely nothing today and in some cases are even down. What’s up with that? This market continues to confound. Absolutely nothing can be easy. You can make the right call on the overall market but then still have trouble making a lot of dough – maybe that’s just me though.
Agreed though on the coiling patterns on the indices – setting up for a move soon. Just don’t know which way.
Looks like that former trendline did act as resistance for the VIX.
Exactly Mac! That’s why i was asking for some long ideas. The longs I had set up from last night are not working today, even though the Dow is about to print +200. I mean, some are up, but I thought they’d be up big on a squeeze. o well.
Like I said, nothing can be easy in this market. Looks like the market is trying to break above this coil pattern but it wouldn’t surprise me in the least to see a breakout reversal and us fall lower. Ugh.
market looks weak to me, but could break either way. I seem to see a similar pattern to mac.
I’m bidding on an 4th gen iPod Nano on eBay right now. someone try that thing out? right now i’m the highest bidder.
I’m fading ENER here for a daytrade. lets see if we can get under 38
Carefull Gio, earning monday morning.
thanks for the heads up, i never knew that. i’m only in it for a daytrade.
Shoot, I got outbid on the nano. bidding on the black one now.
Grrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr!!! someone outbid me at the last 5 seconds! messed up. I’m shorting EBAY.
actually, EBAY looks like a good swing long here, with a stop at today’s low of 13.89.
ENER broke 38. Weeeeeeee.
Looks like Mac and Danny were right. Fade Obama’s lips.
Covered my ENER short. nice set!
nice one gio.
wish I would have played something. in hindsight it was beautiful–failure at HOD, politician speaking…what was I thinking?
Danny… i think probabilities are in favor of shorting Obama’s lips during the lame-duck period:
1) he may say something people won’t like
2) he may say something people like, but realize he can’t do anything about it yet.
Fade Obama!
This market sucks. Anyone else agree?
yeah, pretty much. It was either “hey, I’m not prez yet” or “I think I’ll do this xyz”
mac, agreed. Not a total breakdown, like I was hoping for. And yet, no rally.