Friday, January 31, 2014

Rally Fizzles......1.31.14

Our cautionary note about Thursday's pop turned out to be precocious. VIX was up again today another 6% and now we may be considering the risk reward of either a XIV long position or a VIX long put play......strictly short term. The fizzle was evident right out of the gate as recent lows were retested and new lows were posted.

Utilities (XLU) were hot again today as well as MSFT....up almost a expectations turn rosy for a potential new CEO.  The QQQ was actually green for a bit today and showed considerably better relative strength than SPY or the DOW. Emerging markets in EEM and SCHE displayed good strength also, perhaps developing a bottom after performing just plain dismally in January.

We'll take a little closer look at the VIX situation over the weekend and further assess the likely next trend following January's 5% decay and possible strategies to mitigate risk.