Futures are up. First order of business is to close the gap at 1697.37 and to do it without much of a struggle. The tricky part of the current structure is that stalling around 1700 will suggest a head and shoulders pattern.
Technically, the waves suggest that a top could have been put in, and I notice that the "official" Elliott wave count is reflecting this (though it almost always does). I'm not so sure.
For one, volume doesn't agree. For the most part, volume has not confirmed the entire rally since 2009. It has only showed up in quantity during the declines. The last 5 trading days, however, volume has confirmed higher and has not showed up during the decline. In other words, it still appears possible that a final thrust higher could manifest.
I'm already prepared for either outcome. I have a core position in the VIX and am scalping around it with shorter-dated VIX calls. I have a core OTM put position in SPY that I've been slowly adding to on rips. I've been scalping around that too with shorter-dated puts and calls. I still have the SPXU position offset against the smaller SSO position. There is plenty more room to ramp things up depending on whatever outcome appears.
Evidently 1987 is starting to be openly discussed. The scenario is largely shot down because there is no portfolio insurance this time around.
Let me bring up a different issue: forced selling by leveraged ETFs.
Just as we recently witnessed in the gold market, a decline can feed on itself when ETFs are forced to sell the underlying commodity which they track. The plethora of leveraged ETFs means the same thing occurs with stocks, futures, and options.
Consider the 2010 flash crash which occurred on the heels of the April 2010 high. 1987 occurred in October after the August 1987 high. Crashes happen after markets decline. The flash crash was puny in comparison to 1987 because it didn't have time to gather steam.
Leveraged ETFs are the portfolio insurance of the current market. Money managers who get paid to be fully exposed to the market (and its risks) will forever search for justification in being right, and end up creating a false sense of security for themselves and others. Beware the Red Herring.
I have got some oct and dec call spreads on VIX.
ReplyDeleteDo you think its better to have even longer dated call. Whats your strike price and which period.
Any negative of using spreads.I have got some sep IWM puts(strike 90 and 77) do you think its too close and I need to roll it farher.
Bill
I can only tell you what I've been doing, not what you should do, but I started with Oct 18s and have been in and out of Nov 19s. Want to build a larger position in Nov. around 18 or 19. I just buy premium, rarely ever do I sell it, so therefore I rarely use spreads, especially when trying to game something like an extreme vol event. Hope this helps. Thanks for reading and for your question.
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