[youtube:http://www.youtube.com/watch?v=WOdr9FiNZoQ&feature=related 450 300]

It Sure Ain’t Lionel!

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One thing I can promise you going forward is volatility, in everything, even your Commodores covers.   In fact, I wrote a whole witty diatribe about the dangers of buying “Fo’Teen” here — a.k.a. XIV — the anti-volatility hedge that’s supposed to be the opposite of the bear’s friend in VIX and VXX.   I wrote a whole spiel,  and tried to save it, and WordPress ate it for late evening snack.  Now you get the re-hash, bare-bones style.  Sorry.

It just so happens I was reading something this morning at the esteemed Stocktiming.com website that put me even more in the mind that the recently embattled “Fo’teen” is headed to “Ovaltine” status (that’d be “zero-teen” for the slow-witted among you).

It’s all about the Zero-based RSI indicator which I haven’t time to explain all over again (this being iteration two), so I will just link this page instead.  Suffice it to say, when that indicator is “below the zero line” on the NYA Index, we are looking at continued volatility and difficult-to-trade, bear-leaning markets.

This graphic below, also cadged from Stocktiming.com (hat tip to them),  in conjunction with the link above, will illustrate where we are in the current cycle.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As you can see… anytime the zero-based RSI is over that negative line, stocks have had a difficult time of it.

This confirms a lot of what I’ve been seeing in other areas as well, which tells me players are taking chips off the table right now in anticipation of a paltry Fall.

As a result, all I did today was continue to trim.  I actually tried to take some hedges off by letting the declining prices come to me (on the sold calls) but none hit my buy points, so I remain heavily hedged on some of my oldest deepest in the money positions.   I expect that all the value will soon come out of those sold calls, however, and I will likely end up selling even more rather than re-selling more calls at this juncture.

I also bought some more SKF today.  Not a tonne, by any means.  Nothing more than toe-dips for now, as we are due a nice snap-back rally here.   Use these opportunities, people.

My best to you.

 

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Should we expect more of the same in Day Two, 2010 trading? From a strict momentum standpoint, one would expect some follow through from yesterday’s move, despite the fact that it was a relatively “bleh” volume day, considering the move. And as you can see, we still have some room to go to retouch our [[VIX]] support line mentioned this weekend:

On the other hand, the dollar dropped precipitously yesterday (take a look at the move on the Relative Strength Index (RSI)).

If that continues, all bets are off, and we may be on our way to another devaluation based run-up.   Note, however, that we bounced off the 20-day EMA and filled a gap yesterday.    As I’d mentioned, if we stay above the $2.90-ish area, then I think the dollar strength story is still in play.  

If not, and the dollar continues to depreciate (as it must under this kind of pressure) then our one solace is the Year 2010 picks will be cracking as much as they were yesterday.

Semi-much to my chagrin, as I expected to pick them all up a lot cheaper.   All, that is,  except [[TBT]] , which I think may experience further strengthening, no matter what kind of equity market we see going forward:

TBT’s off about one percent as I type, so it may be a nice time to dip your beak, so to speak, with an easy stop below the 200-day EMA ($49.30) or even better, the 20-day EMA ($48.90).  

Good luck to ye all.

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Volatility looks to make a comeback in 2010, after a nine month doze. As you can see, we are approaching a significant support area in the [[VIX]] :
 

We’ve already come very close to the support line in the latter part of December, but we may revisit one more time before we break out of the triangle. I think once we bounce out, however, we go to at least the 200-day moving average, which should be around $26, at that point. If you look at the long term chart, you can see that even in bull cycles, the 200-day EMA has been a touch-point for the $VIX.

Now you can also see on the chart that my “box” allows for a break down from that level as well, so we must be on guard for the scenario as well. Never get wed to a position, etc…

My second bullish chart is in our favored sovereign currency. [[UUP]] , our proxy, has broken out of the congestion zone, and it’s next two stops are its 34-week EMA at $23.25 , and then the 61.8% fibonacci target, at $23.83.

As you can see we’ve come back fast from a long term downturn here, and I wouldn’t be surprised if we bounce off this congestion line this week, in a final flurry of hope. I expect that congestion line, however (at about $22.90), should hold for this cycle, and we will have further strengthening in the dollar.

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