Friday's close of the VIX and Qs charts shown above.
The Qs did break that RSI2 80 level to the downside on Wednesday, which was our cue to go short as mentioned in last week's VIXology.
The Qs RSI2 is now quickly approaching oversold levels and in the past has shown a tendency to reverse fairly quickly off of the zero level. The 3 bar average (white line) has typically seen the zero line also in prior reversals and my current thinking is to await that cross before getting too frisky to the upside again. The upper LR30 channel band (41) still seems like a reasonable first line of support for the Qs.
Last week was actually the first time my longer term portfolio has been net short since March so I count myself lucky that I haven't succumbed to my mean reversion instincts that have been crying "short" for months now.
Needless to say, I'm ready to reverse course once that RSI2 turns up and the MACD shows signs of strengthening. Job #1 is capital preservation.
The VIX is on a quick roll up, but it too is showing signs of resistance, having kissed the LR30 channel mean on Friday which in turn brought the RSI2 into overbought territory.
As always, we'll just play it one day at a time.
Earnings season is starting again, although there are still 2 weeks until we hit the biggies. My suspicion is that (like RIMM) there may be a few disappointments as most of the belt tightening and cost cutting that resulted in the past 2 quarters of "improvements" have now been implemented and effectively discounted. A spate of such poor reports and guidance could reverse the recent rally dramatically and this is another caution for longer term positions.