Sunday, January 13, 2008

Qs Weekly Update

Top chart is weekly Qs; lower is weekly VIX.

Qs down $ 1.35 or 2.79% for the week. November support was dramatically broken the week before and the next stop looks like the August lows. That corresponds to the monthly 3LRs study of the Qs earlier this week and is suggested by the current technicals, which (perhaps surprisingly) to NOT indicate a significantly oversold market. Thursday's rally attempt fade provided a good tell that buying was most likely the result of short covering rather than value plays. I think the short term odds remain on the sell side as there are few sectors of the market holding up (utilities are an exception) and most are looking vulnerable to further erosion. The VIX also looks like the current trend is up towards the mean at 27.50, which doesn't encourage me to play the long side. Until I see some base building daily patterns I'm inclined to focus on delta neutral premium decay tactics and very short term day trades based on the daily pivots, which provided consistently reliable signals for the past week. Cash is a good place to be until this thing sorts itself out because if we break the August lows the next stop for the Qs is at the 36 level, and that, my friends, is a long way down.

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