Ponzo Updates as Buyers Kick In...03.28.17

We were looking for a rally based on yesterday's reversal action and today's action was solidly bullish with bonds, utilities and gold down and all the indices solidly in the green...although volume was muted.   The current Ponzo forecasts mirror the bullish argument as it appears the buy the dip mentality is still active.  And, TLT still looks like a solid momentum play despite the daily ominous warnings that bonds are crashing.  Now we just have to check tomorrow's action for possible short covering backlash.  In the short term, baring any new geo political crisis, (what happened to the imminent N.Korea and Chinese military threats?), it looks like relatively smooth sailing.

 

VDX Updates....03.27.17

This week's VDX updates suggest a possible bullish move as the week proceeds. This move is further supported by today's solid climb from S2 and below levels back up to the pivot.  Only financials remain in the dog house and we need to be alert for a possible trap door setup on Tuesday...(looks like a recovery only to plummet to new lows).  Volume was moderate today with a taper from the opening 2 hours.  The complete reversal swing of the VIX today from +10% to -2% reflected the internal dynamics of market momentum.
All 3 components of  our little market model  are at above overbought or below oversold levels.
BTW, we exited our SPY straddle Friday at noon (PST) after Zero Hedge noted the odds of a health bill vote were less than 10%.  We lost 7 cents on the trade  (x100).

SPY Straddle Before Healthcare Vote..03.23.17

Here's a setup that may benefit from resolution of the impending healthcare vote.
A smarter dog would have purchased this a week ago hen IV was more muted but as the suspense and likely financial stakes have been so well demonstrated over the past 2 days this may be something to consider.  These options expire on the 29th so rapid time decay is a factor.
We would likely exercise sell to close as soon as the vote is announced.

 

Gold Prospects...03.22.17

Expect big volatility tomorrow as the proposed new health bill comes up before the House for a vote. Odds currently favor a No Pass but we all know that consensus opinion has been wrong many more times than right lately so best to stand aside on this one. If the vote fails we may be in for a sustained pullback where buy the dip is not a wise course of action.  Look to straddles or delta neutral for maximum risk control until this tipping point passes...then we just have to contend with North Korea, the Russian /Trump conspiracy pushed by the Republicans and a few other looming crisis.  These are dangerous times and the fact that the VIX has remained low range is more than surprising.
If things do get rolling to the downside then bonds, utilities and gold/silver are likely to explode.
Here then is the current outlook for gold....which will undoubtedly look much different come Friday as one of the divergent outlier risk scenarios kicks in..

Financials Plummet....03.21.17

Uncertainty about North Korea's intentions, the imminent threat of nuclear war, and the Republicans failure to get consensus on a new national health care plan combined to create a perfect storm for the financial markets as seen through the lens of XLF. And...there's little reason to think that we're going to see a meaningful rebound soon....the fact is those same uncertainties have plenty of room to fester and the next support level is down another 8%..
The purple line XLF Ponzo scenario is something to consider before jumping back in..
BTW, someone sold off $ 1.3 billion in Apple stock at the open....a likely case of buying the rumor and selling the news (Apple' new red iphone and ipad offering).

Ponzo Updates.....03.20.17

This week's Ponzo forecasts have 2 new shifts in momentum. SPY has rebounded from a negative short term outlook to a net neutral/bullish stance although the 19 week target has declined from 25 to 248 in this update. The VIX outlook supports the SPY bullish case and I've left last week's brackets in place (dotted black lines) to show how the VIX outlook has turned negative (bullish).
TLT meanwhile looks exactly like last week, mildly bullish.

XLU Butterflies...03.18.17

Following Thursday's XLU post here are 2 example of butterfly trades using calls, one near term (April)and one farther out (June).  With the Ponzo forecasting XLU at net flat 18 weeks out this type of trade can often produce a very attractive risk/reward ratio...especially the longer term version.
These are, of course, examples only, and not solicitations to buy or sell any securities referenced.

And a longer term setup...