Trade Alerts

Hey Columbo The VIX Is Flashing Red Again?

Folks –

One of the things that attracts me to following the financial markets is the sleuthiness that often reveals key info to market direction. Tom McClellan is a very good detective and I often use his findings in my missives. Last week he saw the June futures prices on the VIX move to an extended spread from the cash price of this Volatility Index. What this indicates is that futures traders believe the price of the VIX is too low and market participants may be too complacent. You can read his article here. Anecdotally I have notice the complacency among many of those I speak with daily.

Many of the major indices/sectors are currently sitting at or near key support levels. The daily S&P 500 (below left) has formed a triangle with flip flopping attempts to break out or down. Yesterday afternoon it broke down, but rallied in the last hour to stay within the triangle. Others include the Dow (18,000 very key level, ) Russell 2000, Transportation, Homebuilders, and Emerging Markets. The Gold Miner stocks (below right) made a similar afternoon rally saving move on Monday, only to gap down and flush yesterday ending down almost an astonishing 10%!

spx-10-5gdx-10-5

Shame on me as I have been watching GDX closely for days and failed to initiate a position on the gap down yesterday morning. Still trying to figure out the signal GDX is sending with this significant breakdown? Thought it might be a precursor to the rest of the market sliding into the usual October retreat, but the magnitude clearly indicates something more. Still sticking with the Halloween correction setting up a buying opportunity. Unemployment # coming Friday AM so next couple of days could be benign.

Famous last words,
Max

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