The market is up and down widely these days, seemingly doing a lot but in reality, it is just chopping around without a clear direction so far.
While I'm more bullish than bearish in terms of moving towards the year end, I think the next weeks or so will continue to be a choppy market. Why so?
Well, my crystal ball is telling me that silently 😉
If you have followed my blog for some time, you know I have a reliable crystal ball: the VIX options. Given its unique European style, the VIX options often can foretell what is most likely to happen in the market. And right now, it is telling me that in the next two weeks or so, it does not expect to see a decisive trend in either direction. That doesn't mean we won't see big moves in one direction or the other. But, whatever big moves we get one day are likely to be reversed the next. This is actually what we've been seeing for the past couple of weeks... The market falls one day, and then bounces back the next. The market rallies on the opening of trading, and then sells off by the close. In the past two days we have seen a great market rally. Will it continue to make new highs next week? I highly doubt it! Actually I will bet we will see a substantial retreat next week. The VIX call options are signaling a sharp increase soon, which often means a market loss accordingly. As such I bought VXX calls and SPY puts today.
The market has been a choppy mess for most of the month. Until my crystal ball suggests otherwise, it's likely to stay a choppy mess for a while.
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