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Monday, August 31, 2015

Monday Morning Market Update

Reviewing the market action of the past 2 weeks:
Sucks to be an investor, but this is some of the best trading we've seen in years; can't eat; can't sleep, love it! I would like to see high volatility continue, but that doesn't happen going into a holiday. With Labor Day only one week away expect more short covering.

Look back at the past 2 weeks: The crooks who run the Casino Stock Market, first robbed the retail investor in a 3 day shakeout which started by triggering a widely accepted sell signal ($VIX 20+) which was cleverly taken out when few expected it (on OPEX), and then they robbed the retail short (in a historic run-up in energy, oil and more). The oil trade is another story, but that turned out to be an even better trade than the broader market reversal.    

Today the retail investor remains overly bearish, and it doesn't take a genius to know what comes next. The market doesn't care if you want to see a pullback or not. Volume confirms the trade, and this is some of the best we've seeing in years. Either fight it, or enjoy it, but don't let your emotions get in the way of your trade. This is the whole purpose of watching the $VIX.

Speaking of the $VIX: The only way we get a retest of the 1900 level, or a lower low any time in the near future is if the VIX can return to 50.

So I'm reiterating my bullish short term outlook, as it becomes obvious that the $VIX is about to be taken down below 20, and when that happens it's going to bring panic buying by those who continue to insist that "volatility is going to continue", and the "the worst is not over" crowd. Sure there may be more pain ahead in a few weeks or more, but these snapback rallies always continue further than you think they will, and this one is far from over. We haven't even identified a tradable pattern yet.

Once we see the bears capitulate (talking about the market here not Oil) I expect to trade into a confusing consolidation pattern on low volatility - probably after the Labor Day holiday - and pullbacks into consolidation patterns, are far more difficult trades than these short squeeze rallies are. High volatility is where the big money is made, and lost, so stay nimble.

This morning We're seeing a little pullback in futures, but considering that the $VIX is trading in the mid 20s, and headed higher, we could've seen a lot worse than 20 points down on the $SPX. If we see a bigger pullback we'll be watching the 1950 level.

Watch my Twitter feed for up to the minute chart updates throughout the day.
Take Care, Anthony Allyn

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