Thoughts on VIX and VXN
July 14, 2008 | Leave a Comment
I just wrote my daily commentary over at my blog and included a blurb about the VIX and VXN. Here it is:
“VIX and VXN continue to be “low.” I had the opportunity to speak with an individual who had graciously share that some large institution was handling a large quantity of employee options. There is a debate if the VIX/VXN have sufficiently signal a bottom. Afterall, both have moved almost 100% off their May lows wouldn’t that show enough fear? One explanation that was given to me was the large, LARGE amount of employee options that had hit the market forcing this large institution to sell volitility (vol). What this creates, a low VIX and VXN. Therefore, if this large institution was selling vol than VIX and VXN have moved sufficiently because the indexes are “artificially” low. But, in my experience if a financial instrument are “artificially” low or high they tend to OVER correct on the other side. In this case, VIX and VXN aren’t sufficiently pricing in fear and will overshoot at some point. The bottom line, we haven’t seen our ultimate lows leading up to a new bull market and we should continue to wait patiently on the sidelines.”
I think it is important here to note that when anything is held down artificially it will over correct to the other side.
Sloppy Markets Lure Sloppy Traders
July 11, 2008 | Leave a Comment
Today is another PRIME example of how bear markets with low VIXs and terrible NH/NL work. This market continues to be plagued by those who love to be a hero and catch the ultimate bottom. So far, how has it worked out for everyone? Financials are a complete disaster, years away from recovering and we have Crude Oil prices at all time highs. The Global Economy is slowing, inflation at home and abroad is not slowing down and better yet look at all the charts of major indexes from around the globe. The charts are telling us there is something serious afoot globally. Our global economy is not what everyone thinks. Our markets are in the process of determining that at the moment. Let the charts guide you and they are screaming to KEEP OUT.
Inactivity is your best friend, better yet a vacation is calling everyone’s name.
Main Street Fears Lead to Wall Street Profits
May 7, 2008 | Leave a Comment
According to a new CNN poll 79% of Americans when asked ” Is the US in a recession” said yes! Main Street has given into the media constant hype about high oil prices and how BAD the US economy is. Most on Main Street form opinions not on their own situation but what they think others are. Concern for your neighbor is ok, but does it actually reflect the current environment. In these types of situations, Main Street is wrong and does not reflect the actual reality but more so perceived reality.
As Crude Oil hits another all time high, Main Street will be reminded HOW BAD the economy is and how bad the Bush adminstration is. In reality, we have not seen back to back negative GDP growth and we have even seen negative GDP growth AT ALL. Even today, we are seeing selling only on the NASDAQ with higher volume. With that said, it will only be the second day of distribution the index has seen in recent weeks. It takes 5 to 6 days worth of distribution to knock down a market.
Again, no panicing allowed! Turn off the mainstreet media, go enjoy life!
Trading Scared and with Emotions Burns Through your Capital
April 25, 2008 | Leave a Comment
In the past few days we’ve seen some nice runs in stocks and some stocks that have pulled back after gains. An example would be MTL, which we are long for those who are Big Wave Traders. Yesterday the stock was being hammered in the AM. A few members were a big frightened and had no clue what to do. Since we are not day traders it makes no sense for us to be emotional about moves intra-day. By the end of the day, MTL was down 8% but volume wasn’t overwhelming and BOP actually increased. The stock is maintaining its uptrend and has not broken down on large volume through its 50dma or 200dma. We do not panic, Jesse Livermore stated “More money is made waiting on stocks.”
This market is setting up for a big upside run. We do not want to be cutting the stocks that are making moves and rotating into laggards. Stick with your winners!
Sentiment Still Negative
April 17, 2008 | Leave a Comment
AAII and II sentiment numbers continue to show bearishness among market participants. Whether its the media and/or consumer sentiment, market participants are feeling the same way about the market. AAII saw Bulls at 30.37% and Bears at 48.69%. While II saw Bulls at 37.8% and Bears at 38.9%. II tends to be a more reliable indicator of Investor sentiment, but the AAII shows you the crowd is not very bullish.
Continue to follow price and volume, we saw some volume yesterday and charts are beginning to look better. This isn’t 2003 but we can deal with taking some gains here.
Market Speculator
Money is Made in the Wating Game
April 12, 2008 | Leave a Comment
Stocks are clearly not ready to break to the upside, nor downside. Friday’s painful % decline was not all that bad. GE’s dismal display of earnings had many on the street shaken. Although a GIANT, GE is not a leader in this market and we should be caring about leadership not who is the biggest. GE’s volume accounted for more than 1/4 of the NYSE volume, without NYSE volume would have been pathetic let alone down.
Thursday’s action was definitely a positive sign for the permabull/goldilocks crowd, volume surged while we had price gains. However, Friday’s action is showing that this market isn’t quite ready to break up/down. Jesse Livermore always stated that more money was made by waiting rather than doing. CASH continues to be KING, throwing a large amount of dollars at this market will only get your account to shrink.
We can certainly be taking small positions, we have been here at Big Wave Trading. However, we are keeping a lot of cash on hand so we can be ready for the next big bull run.
Stocks Show Some Life, as Volume Continues to Fade
April 3, 2008 | Leave a Comment
There is certainly a bullish tint on today’s tape, but the low volume continues to linger. Whether or not you believe we’ve ultimately have bottomed, you can not deny the fact that institutional support here is VERY WEAK. Until there is an indication of institutional support this rally will remain suspect.
I would like to see gains on heavier trade and low vol pull backs. Yesterday we got just that, but up volume days continue to be below the 50dma. This market needs many follow-throughs to confirm the action. This isn’t the time to be fully margined, this ain’t March 2003!
Stocks Poised for a Positive Close
March 31, 2008 | Leave a Comment
Stocks are acting like they have support going into the quarters end. The real issue here is with volume. As of 11:35 volume appears to be lower than the run rate on Friday. Not much support for the bulls here, institutional buyers are simply not stepping up to the plate to support this market.
If we continue to move higher and on continued lower volume it will spell trouble for the market. The lack of accumulation is not astounding nor is it surprising to me. This was and still is a classic bull market bounce. No volume and clearly driven by oversold, short covering conditions.
Tomorrow’s session should be more indicative of the action going forward. Lack of volume the past week of action is indicating to me that more selling is just over the horizon.
Stocks move higher without steam
March 25, 2008 | Leave a Comment
The collective yawn you hear is coming from today’s stock market. At 3:55pmEST volume looks to be lower by 10-15% across the board when compared to yesterday’s volume. This is definitely not the type of bullish action you would like to see in a confirmed market rally.
Mid-caps are leading the way along with the NYSE composite index. Boring markets are hard to guage, price action is bullish but with such a dry up in volume. It is hard to get any excitement out of today’s gains.
Dow Follows Through; Issues Remain
March 21, 2008 | 1 Comment
IBD has called Day 8 of the Dow Jones Industrial average a follow-through day for the market. This ultimately confirms the most recent rally attempt. It takes only one index to follow through to confirm a market rally regardless if any other index takes out its most recent low.
I am not as bullish in the short-term has Joshua however, I do believe we could see a rally. Ultimately, I do believe that this rally will fail at some point in the near future. New Highs are not turning around, New Lows continue to dominate and the number of stocks above their 200dma continues to be lower than stocks over their 20dma and 50dma. Ideally, you want to see more stocks above their 200dma. This would suggest that a long-term uptrend is in place.
Although we are in a confirmed market rally, there still remains the high risk of this rally failing. Cash is King and longs should be kept small.
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