Volatility Review

I spent a great deal of time reviewing the historical volatility action and the relationship with the indexes. There is an obvious inverse relationship, but are there any signals that tell me to look for reversals.  Looking at the COT data, and the intensity of the leveraged money positions, I think I have found something trade-able.

Whenever the VIX is oversold and the percentage of long dealers to leveraged short Money Managers hits 35% or lower the VIX and the stock market both reverse within two weeks.  In addition, this time the amount of leveraged shorts is at the highest in open contracts this year.

One other thing I noticed is that the number of leveraged contracts in 2013 far exceeded the average so far this year.  I must assume that as the FED eased off credit printing, the market players used this funding mechanism less, and the stock market flat-lined.

I am and remain long volatility, and short the market until this ratio moves back into the 50% or greater range.

bonus chart, CSX looks ready to move higher again.

Enjoy the charts, and click to enlarge.

Potpouri

Everything is coiling, and all sell offs are being bought.  I would love to see the math on calculating the Fed credit declining upward slope and amount against their (Big money) buy/sell models.  My view is the Fed's balance sheet starts growing at an accelerating rate again this summer when the the Treasury needs buyers, and I wonder if they are rope a doping the indexes until fresh, leveraged credit comes into the market.  Oh by the way, ignore any talk of us raising interest rates for the next five years.  They are simply trying to confuse you.

I think I will start paying more attention to the bank index for a clue.  It has been weak as their only source of reliable profit is being reduced.

In the meantime I will just look for trades and stay very short term.  I am still short Biotech and gold, and long VXX.

On a side note, I just upgraded my trading system and am moving files over this weekend.  I will post the portfolio as soon as I reload all of my programs.  The option trades from my signals for subscribers have been on fire and if you want them go to www.realtimetradingsignals.com

Enjoy the charts, and have a great week.  Please click to enlarge.

VXX is Washed Out

Sorry for the late post for the weekend.

My signals are screaming buy on volatility.   It is now at levels where there are big bounces.  Investors are not selling gold, they are not selling bonds, they are not selling dollars, and I believe they ran out of volatility to sell.

I bought VXX June 37 calls at the end of the day.  Tomorrow will not be too late.

Please click on charts to enlarge, and go to www.realtimetradingsignals.com for more non public option and position trades.

Broken Record

Not much has changed in my signals and my macro look except I think gold, silver, and the miners may have bottomed, and I have taken off my speculative puts and replaced them with calls on GLD and GDX.  I will close my DUST portfolio position this week.

I remain short everything else, UCO, Biotech, UNG, GASL, and have ES short future contracts.  The Fed did as I expected, because the math demanded it, The Fed is the only game in town and after June, the government will need funding again.

In the meantime expect general downward pressure in commodities, and high beta, and a lift in volatility.  We have squeezed that lemon to the pith, and no one has nearly enough protection.

Enjoy the charts, and remember to click to enlarge.  If you want to some real time option picks during the week, please consider my service www.realtimetradingsignals.com.

My trading computer is in the shop and I will post my portfolio and performance upon its return.