While watching the incredible exploits of Felix Baumgartner http://www.redbullstratos.com/ as he successfully broke the record for the highest free fall jump, I learned something, and that was there is a line of altitude once breached requires a human to where a pressure suit, and obviously oxygen, in order to stay alive. That is the Armstrong line.
This week the market powered metaphorically through that line, and like the human body, it will require extraordinary measures to maintain, and or rise from these levels.
My momentum based buy signal is overbought, showing a pretty large divergence on the daily, from the September peak, to this new high. There is not the same intensity. On the hourly, which I trade, I am getting chopped now on my signal line. This is a red flag for me. My signal chops on consolidation and reversals. This looks like the latter. Eighty percent of the components of the S & P 500 are buys on my signals, and twenty percent of those are considered blowing off on my indicator. I am not screaming bear market here, as I am convinced sometime this spring we will reach the Von Karmen line (Google it), and reach for those new highs.
I think the volatility play is over for now, the February to March expiry is not nearly as steep as January to February curve, and the last time we had a fall so steep in volatility, it rose 55% over the next two weeks (hat tip to Zero Hedge). I have been riding XIV, and now long VXX. Retracing some of the Vol calmness will pressure the broad markets.
I think gold, silver and the miners are ready. The cycle guys are saying we are swinging to participate in a multi month move, and I have/had buys on both metals. Miner ETF's are still chopping, but some individual stocks are buys. I am in NAK, AG, and NAK. Miners have totally decoupled from stocks, and am looking for some regression to the mean.
As an aside, I am doing a paid webinar on day trading XIV, a trade that I do a lot, and have had some very good success. If interested email me to get the details. The class will probably pay for itself on your first trading day.
Enjoy the rest of the long weekend. Bob