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VIX Major Break Down Setting Up Sharp Drop Soon

Market showing false rally last week with a trickle up. A dip below 18 into 16 would verify that the VIX is “broken”, and is normalizing back to its 20-25 range. Good entry to short here, with VIX heading into complacency levels. Market is just waiting for any news item to trigger the event, so careful with longs here.

Fade the Gap: 1/2/2019

The play: short morning gaps as long as VIX continues to decline. Need to understand that a weakening VIX in a bear market create intraday bull traps. A proper squeeze in bear markets start with opening gaps and rise up throughout the day.

The setup: find imbalanced bid/ask stocks that overpriced the stock within the first 30 mins. Short stocks that rise a little then return to the morning open. Stop set to 1% above the pivot point of decline.

Stocks to short:

SaaS profit takers $MDB and weakness $SVMK.

Weakness: $ARLO $FIZZ $CRON

Momentum cool off: $SHOP

Tipping Point: $EA $FIZZ $FATE

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WAVE RIDERS:

Stay short $TVIX

Buy dips on gold/oil. $DRIP $NUGT

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SPEC PLAYS (1/2 Position with wide stops)

$UMRX (watch $LABU)

$YINN $MOMO

Rise of the Red…

Melt up to 20s, then rally to 34. Big gap to fill.

No, not red as in our current and fierce bear attack. Rather, a quiet emergence of Chinese burritos hails forth from the horizon. Usually when the markets are extremely volatile, you need to look elsewhere. It can be crazy trading right now, and unless you are timing your shorts right, you are swimming upstream and the pros will sweep in and take your money from your shaky hands.

Buying up $YINN here and plan on averaging up. Also grabbed $MOMO.

And for a spec play, there’s the short squeeze candidate of $IQ which can rip to the 30s.

Trades for 12/26/2018

Day Trades in Play! $EDIT $MDB $CRON

Swing Trades Set Up // SHORT: MDB, WWE

Swing Trades LONG// $CVNA, $GOOS

On watch: Oil is due for a reversal. Gold as well. Might short gold for day trade.

It’s going to be light volume tomorrow. Allowing for imbalanced bid/asks and other manipulation. Take advantage by manipulating the price yourself with limits. Keep entries in 3s. One per pivot level, with 3rd add being smallest.

Small – Large – Small

FED Tells Investors to Take A Hike, Dow nears 52 Low

Get your money outta here!

Going back to June 22, 2011, the Fed has now raised the rates nine times in a row, and their fourth hike this year. Government doesn’t trust you with their money. Good one. I think the Fed is trying to make up for their Operation Twist experiment, with their Quantitative Easing. Watch out as inflationary pressure bleeds over to the broad market.

Looking at the week chart for the Dow does not look healthy. Low volume rallies getting wiped out by weak dip-buyers who sell at every news reel. If I saw that chart above and thought it was an equity stock, I would short it hard as a swift drop would be on the way.

VIX 25 + Divergence Signals Short Term Reversal

download (2)Sold $BOOT  +7%
12.18.VIX-25

Got a buy signal (or cover signal) on the VIX today around 25.  A rare occasion where the market went up a lot, then the VIX also went up showing a ton of hesitation buy traders.  This is coming ahead important Fed news, which produced a ton of selling in the afternoon to wipe out most gains.  Tape is very much dominated by day-traders and algos.  Until volume picks back up, we’ll continue to get wide spreads and inefficient bid/ask pricing.  Use limits, otherwise slippage will own you.

The strategy would be to buy up some beaten up stocks, and continue to buy them as the VIX tightens its channel and retraces back to 22 level where we will be shorting heavy.

LONG:  CLDR, SPOT, GRUB, SHOP, TWLO

SHORT:  FEYE, EA, EB, FATE, WWE