Monday, December 14, 2009

Monday VIXology

Last week's VIXology forecast a consolidation and that's pretty much how it played out.
Qs advanced one thin penny, IWM lost a quarter and SPY advanced a dime.
The VIX rose .34 or 1.6% and is now in an inside bar pattern on the weekly bars as it approaches the lower LR30 band on daily bars. The VXX finished the week with a nice little doji at the lower LR30 band and with the MACD reading at the zero line the PDQ is suggesting a SHORT position.
The VXX has been short for 3 days giving us 100% accurate forecast. The FXF N day value is 7 so we'll need to keep our stops in place in case expiration week volatility shakes us out of the position.
Although the dollar made a nice jump last week, previous excursions to the LR30 upper channel
in October and November led to retracements all the way back to the lower LR30 channel so our optimism is still muted for UUP.
Looking ahead, the Qs and SPY have sold off January for the past 2 years, and while there's currently no trend momentum suggesting that a selloff might be repeated this year, note that looking back for the past 5 years consolidation the last two weeks of the year has been the norm . . . so in the face of the current subdued volume, this seems like the most likely scenario going into year's end.

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