Thursday, November 14, 2013

Bears are Endangered Species

We got a monster intraday move off the gap down yesterday and it seems like quite a bit of short covering when we hit new all time highs, ahead of Janet Yellen today.  Eventually it will be a surprise when the Fed doesn't pump the market, but it still seems to catch bears off guard and make bulls bolder.  I am now itching to go short for a swing trade, something I haven't felt like since August.

First there is the psychological barrier of 1800 just above, and the complacency of the crowd.  Second, long term yields are rising, which will keep a lid on interest rate sensitive sectors.  Lastly, I am seeing Europe starting to lag, at the same levels as when the debt ceiling deal was announced, almost 1 month ago.  In the meantime, the S&P is up 50 points.

ES 1790 will be a premium short entry, and one that I will take if it happens by Friday.


Anonymous said...

It has started. We will get a small consolidation until Tuesday of next week, then a sharper rise, no one expects it.

Anonymous said...

"Permaneutral" I am long March 26 27 30 VXX2 and VXX 92 calls. ( did cut my TAN longs half and will keep the rest) As you described earlier I agree. Market is topping. Budget/debt ceiling issues should help to move market significantly lower.

Market Owl said...

I don't think VXX is a good vehicle for making a play on a market moving lower. You have to have a big move lower in order to overcome the contango in the VIX futures curve.

I prefer just buying SPY put spreads or just going short ES.

I also see good potential to capture downside by shorting FXI or DXJ or by buying put spreads on those ETFs. I always prefer to short the weaker global equity indices rather than the beast which is the S&P 500.

Anonymous said...

"Permaneutral": I experienced when VIX futures were moving into backwardation after bought calls on backmonth VIX options.The VXX back month calls behave a bit differently When comparing front and back month volatility curves using Livevol Pro volatility charting on VXX backmonth spikes along visibly. VXX is a bit more like single stock when looking at its options I'll consider put spreads and the rest. Thank you.