Thursday, October 17, 2013

VEGA Update...10.1713

Volatility is the focus of attention as the market readjusts to the funding and debt ceiling plans which really accomplish nothing except to promise a deja vu experience of this same drama come January and February.

What was truly surprising was the 10% drop in the VIX  accompanying a 100 point drop in in DOW at the Open.  Those 2 issues are supposed to work inverse to each othe,r not in lockstep.

The immediate conclusion to be drawn from that odd alignment is that not everyone saw the new "compromise" as anything worth cheering about and it will be instructive to see how the markets play out tomorrow at October option expiration.

In the meantime, the VEGA all in model keeps chugging along and,  irregardless of whether the money management stops were followed or not, the equity curve has shown steady improvement. 
The 30 day TRENDX is suggesting that we're due for a pullback, likely greater than the one day gyrations we've seen lately.
I hope users have taken advantage of the TRENDX charts site...a link to which is provided in the User Reference section on the right side panel.
The SPY VIXEN and 5 minute SPY TRENDX have been very precise in forecasting the SPY's recent rise and fall and the live charts can be particularly useful for timing intraday entries and exits.

Here was yesterday's VIXEN set up as of 8:30 am PST (2 hours into the market).
Watching how the VIXEN reacts to the first 20-30 minutes can provide a strong clue as to how the markets will move until at least this case UP.

  Here's a shot of today's VIXEN as of 8:15 am PST..
We're seeing a divergence, but not a cross.  The implication is bullish but momentum is not in the go-go mode of Wednesday.
Here's an update of the same chart as of 11:30am PST..
I've captured the SPY 5 minute TrendX chart as well just to illustrate the alignment.
With this perspective of hindsight its clear that momentum was more bullish than the VIXEN led us to believe from the earlier chart.
On the other hand, it was much clearer on the TRENDX chart that momentum and price were on the rise.
Using these 2 charts together can therefore provide a 2 heads are better than one perspective and help confirm true price dynamics.