Friday, December 27, 2013

VIX On the Move?

The VIX did move up a bit...but 1% is trivial when the VIX can fluctuate 10% or more in a single day almost 15% of trading days.  Nevertheless, it's a start.  The markets remain overbought and, adding to the bull/bear conundrum discussed yesterday, we are now faced with an end of month bullish bias for Monday as well as a pre New Year's day bullish bias.  Who said trading was easy?

The M3 SPY Trader has now kicked XIV out of the top slot and we're back to cash in our SPY account. Keep in mind that the M3 SPY version is basically a volatility momentum trading platform.
When XIV falls out of the top ranking position that signifies waning bullish momentum in SPY...maybe not a reversal, but certainly a reason to pay closer attention to any open positions with an eye towards preserving recent gains.

Note the cross on the 2 day ALERT and the down hook on the equity curve chart.
The model has racked up some decent gains using the AUTOSTOP function to validate trades and we're now in a standby mode...waiting to see if the multiple bullish biases push the markets higher.
If not....we should be prepared for a pullback that may take us back to the SPY TrendX support line....see right side's long overdue.. and the increasing open interest in the Jan VIX out of the money calls suggests some deep pocketed traders are betting to the short side.
Also note the "A" pair momentum chart (SPY versus XIV).  The skew is fast approaching the zero line...which has been a reliable trend reversal signal in the past.