(click on chart to enlarge)
CHART AU COURANT: Following up on the headline from last post, at least a short term low is due this week for the stock markets in the US of A. This chart of VIX is how the "street" measures panic. It's the price of buying insurance against the worst case scenario. So, when VIX is low, the street is NOT fearful of things they don't know about. When it's high, they are very, very worried about disasters they don't know about. However, it's like child psychology: when you want your child to do something, you tell them not to. Here, the street (which is all of us put together) never buys the panic insurance until the disaster they didn't know about happened. That would be like finally buying your earthquake insurance after the big one hits. Stupid, right? So, we use VIX to tell us when the disaster is over or nearly so. Look above...you see the spikes in the past above the 30 level are rare, and above 35 are very rare. In fact, VIX has never closed above 35, and only closed above 30 a handful of times in its history. When it's up this high, it's telling us that street is paying too much for insurance against disaster, and it's time for a reversal in the next day or two! In addition, the stochastics are extremely extended above 90, which is also rare. Finally, the VIX is approaching the 4 standard deviation band. The only time in history that the VIX closed above this band was in August 2007, when it actually rose to the 6 standard deviation band for a few minutes. That panic low led to a 1700 point Dow rally (13%) and 200 point S&P rally (14%) in the following two months. Don't get me wrong. Nothing is for sure, but I point out that this is what short term bottoms often look like, at least in the past several years. On the other hand, very rarely, panic like this is actually ahead of the actual disaster. If that is the case this time, imagine what the disaster will be, considering what we know so far.
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INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions, which usually happens close to market lows. But, stay tuned. We took amazing profits into the Freddie/Fannie failure and will re-short on a reasonable rally.
INTERESTING PLAYS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3, exited at breakeven premarket 9/19) and adding under 400, EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using 13.48 stop as of 9/10, exited 24 premarket 9/19, +8.99 or 59%), GRMN under 30 or above 35 (down from 36 on 9/16, entered 35.01 on 9/18, using breakeven stop as of 9/19), DELL under 17 (entered 16.50 9/16) and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV entered 10.75 and adding twice this amount at 7.75. GS under 118 (entered 117.48 on 9/16 6:09 am, exited 139.80 premarket 9/19 +22.32 or 18.9%) or above 130 and adding under 88 (lowered from 95 on 9/17), C which is riskier than most below 15 (entered 14.99 on 9/17, exited premarket 9/19 @21.99 +7 or 46%). GE under 23 (entered 22.99 9/16, exited 29.49 premarket 9/19 +6.50 or 28%), MS under 18 (lowered from 24 on 9/17) (entered 17.99 on 9/17, exited premarket 9/19 @34, +16.01 or 88% ), JEF under 14 or above 19 (entered 19.01 9/17, exited 28 premarket on 9/19, +9, or 47%), SBUX under 13 or above 17, UWM under 43 or above 46 (entered 46.01 9/16, exited premarket 9/19 @ 55, +8.99, or 19.5%), RIMM under 95 (entered 94.99 9/16) or above 100, AAPL under 135 (entered 134.99 9/16) or above 140, INTC under 19 (entered 18.99 9/16) or above 21.
In Crude, I will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10) adding near $90 (added $90.98 on 9/16 @4:30am PST, exited this second position only $96.98 on 9/17 11:28a PST, +6 handles or $3000 per contract). I'll add it back under $89.
Re-entered the Euro at 1.4439 @ 8a on 9/3 (exited 1.4539 on 9/18, +1 handle or $1250 per contract) and I'll add second entry back if under 1.4050 (added 1.4049 on 9/15 @ 4am PST, stop on this second position only at 1.4000 entered 11am PST, exited this position only 1.4359 on 9/17 @11:44a PST, +3.1 handles or $3875 per contract), standing aside now to see how things shake out.
For what it's worth,
Ken
