As I've said before, the longer the market takes to form a top, the worse the correction is going to be, and we're already 5 months into this rally. Seems, more than just, "a little", long in the tooth
But I finally think we could see a healthy correction, shortly, based on what I'm seeing on the $VIX, and even the French $CAC - nearly testing the all time highs, this morning!
The $VIX has continued to sell off, since I called the market bottom, back in Oct., but at what point is the $VIX getting oversold, and market participants being overly complacent. Right here, I think!
The whole point of the $VIX is to offer an easy way to buy protection, but over the past few years we've seen the $VIX shorted, as a way to keep volatility down. I can't tell you exactly how that works, but I can see it in the charts.
Many Pro Traders are questioning the $VIX at these levels, and the amount of selling we're seeing on the $VIX, on a daily basis, as well as the daily snap-back rallies in the already overbought equities market. One theory is that daily Options trading is to blame? I don't know if that's true, but we've seen the $VIX shorts get burned before.
2018 $SVXY (VIX Bear) $VIX short sellers slaughtered
Yesterday
$VIX - once again it's hammered out of the gate!
$VIX hammered back down pic.twitter.com/LxHKUXJJTA
— Veteran Market Timer (@3Xtraders) February 15, 2023
Yesterday afternoon, I alerted to what looks like a bottoming (triangle) pattern on the st $VIX
false alarm pic.twitter.com/xYEscDjMUc
— Veteran Market Timer (@3Xtraders) February 15, 2023
$VIX - trades into a bullish setup on the DCS chart
I was thinking we could see a Black Monday, and we could... overseas, but Monday is a trading holiday in the US.
Of course, we could see a Black Friday OPEX tomorrow, and since the market bulls haven't paid their protection money - in the form of Put Options - that would fit, but bloody OPEX dates are very rare.
99% of the time, you see the market hold up on Options expiration, just as we did, before the so called "Covid Crash".
Take Care, AA
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