Tuesday, September 7, 2010
VIX on Verge of Issuing Stock Market Sell Signal at Today's Close
Just some follow-up to the latest post from Friday. The VIX looks like it's going to close back above the lower bollinger band today which will be a sell signal for the stock market. The market may flip flop around for a day or so, but within a few days the market should be headed lower in the short term, but possibly much longer. When you add the fact that we are entering a normally weak time in Sept/Oct for the stock market, the market has rallied too much too fast, intraday momentum indicators are severely overbought, and the wave structure in some markets are pointing a very bearish picture......this VIX sell signal should be seriously listened to.
Often I don't feel speculating with near term put options with no protection since timing market moves is extremely difficult. But if the VIX sell signal looks like it's going to execute going into today's close, I'll be buying September and October put options on the QQQQ and SPY.
The euro also looks to have topped and is declining impulsively. If people feel the VIX sell signal is legit and want to trade currencies as a result, I'd consider shorting the euro, USD/JPY or AUD/JPY since they tend to move fairly correlated to the stock market.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.