Following my blog on Monday about the mini "Black Monday" and my aggressive trades for the long side, I posted another real time note to my group on Wednesday:
As expected, the market has rebounded strongly and recouped all the losses on the Black Monday within two days! Quite impressive indeed! So are we marching onto making new highs again? Sure it is always possible as for this year, bulls have proven again and again to be able to challenge all the norms and do something unthinkable. For bulls till now, gravity means nothing and they can fly without any problems. On the other hand, the law of physics must be honored sooner or later and no one can fly without being pulled back by the gravity on the earth. We will see the normal behavior eventually, just a matter of when, not if. After fierceful rebound in the past two days, we are seeing something just opposite right now: bearish indicators are flashing with extremely high VIX call/put ratio, in the order of 7:1 for the next week. This suggests the chance is very high that we may see a pullback again soon, probably a retest of last week's low around 4250ish. I have taken my short term profit from the long side today and started to build up short side trades now. Will see if I'm lucky again!
Well, the market definitely wants to outsmart me and it is indeed making new highs today! As stupid as I am in trying to guess what the market is trying to do, I still stick to my gun, thinking that this bullish move is very close to its end, if not yet done. After all, we will have the FOMC next week and typically the market will be weak prior to the meeting. What's more astonishing to note is the extremely high VIX call/put ratio for the next three days: the VIX traders are betting nearly 10 times more for calls than put for the expiry date on Mar 28. And if VIX indeed jumps, what will happen to the market? Just think about what happened on Monday! The extreme VIX call/put ratio is my crystal and it has been quite accurate for the short term direction. With that, I'm adding more trades for the short side today. 😎💪
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