It sure looks like distribution has started, but the SPY had another successful test of the intermediate bull/bear line at the 50 EMA. To boot, it also double bottomed. The good news is the market is now giving us something to work with here.
A failure of the 50 now with stochastics still falling or maybe embedding gives us confidence of a move down to next level of support or to the 200 EMA. If stochastics cross back up then I am watching the 20 EMA, then to see if it forms a right shoulder, double top, and then a move to new highs.
At this point I am not going to play from the long side other than some special situations, and any short term buy signals I get on my XIV trades (more on this in a minute). From the short side I am going to play a SPY failure with REW. Technology is weak, and a triple short of a weak sector is my focus. EDZ probably is a good play, as well.
Regarding volatility, and XIV. I offer a service for buy signals for XIV, and it is very profitable, and a consistent winner. This week shows why I love this instrument so much. Volatility was very elevated this week, but XIV fired off four buy signals, two were profitable, with a net gain of $.94. Since I margin this trade, the net annual gain for me for the week was 8.75% or 450% annualized. It would be higher except that we had a trend change which means until the trend changes back I sell all of my buy signal wins EOD, and the first signal was stopped out for a $1.00 loss (instead of a $.7 gain if sold it EOD) as it was still operating under an uptrend signal.
Why you ask am I fooling around with XIV an inverse to volatility in a rising volatility environment? It is the nature of this particular ETN that the moment the pressure subsides, it acts like a cork and flies up, as traders remove protection. I will make a lot money trading this in a stock bear market due to that attribute, and if I sell EOD. It is rare I will get so many buy signals in one week, so even those under pattern day trade restrictions can take all signals most weeks.
I rarely shill for my stock services, but my business partners asked me to create a special service for this, and I did, and we priced it so that everybody can take advantage of it, or test it out to see if it is worth it to you ($10/month). Current paid subscribers of my other services get this for free, so no need to sign up for it.
This pricing will not last though.
Don't trade XIV in this environment unless you have access to your account and can trade it intraday. Also, this is just a piece of the portfolio for me, so don't load up on one stock. Email me to get sign up information.