Sunday, April 18, 2010

Godot Arrives

First . . please note a change to the blog publishing schedule. Future postings will be released early in the evening rather than pre opening. This change will (hopefully) enable readers to take advantage of EOD conditions and prepare for the following day trading opportunities.
While I had initially considered making these advance posts available only to my Plutonium subscribers, in the spirit of equality I'm extending it to my Platinum and Gold subscribers also.
That's what we call an instant response as the VIX surged over 15% and Qs volatility rose 7.5% on Friday. And, despite the widely expected market reversal off VIX 15 levels, even the most non-conspiracy minded trader has to ponder the perfect timing of the SEC's announcement of GS fraud charges that prompted the explosive move on Friday (also see the last chart at the bottom of this post). Wouldn't it be funny if it turned out GS was massively long VIX options going into Friday?
Hey... ZeroHedge...let's check it out.
Interestingly, the VXN Strategy Matrix, as discussed on Friday, is now basically neutral on the VXN, with the longer term fractals skewed to the long side. And, there is some support for a moderately optimistic view based on the Friday's NYAD performance.
While the NYAD did manage to hit the low teens for a few mid-day hours, the slope into the close was modestly up, closing at a not too scary .24. The underlying 3 SMA and MACD technicals actually paint an optimistic picture of Friday's close, but I'm still playing this hand close to the chest.
And now a note on the Qs VIXEN:
Above and below are 2 minute bar charts of the Fridays Q's action with the VIX overlay. The upper chart displays the real time cross of the VIX at 10:50, setting up a short trade just ahead of the big drop through S2 and down to S5. Of course at 10:50 you've really no idea how far this thing might drop which is a big reason to keep one eye focused on the NYAD VIXEN chart (shown above the Qs chart). These 2 amigos move together like clockwork.
The chart below shows what happens when you view the same setup in the hindsight of the end of day. Now the trigger has migrated to 11:15. I've posted extensively on this "floating" character of the VIXEN but this is a crystal clear example of the phenomenon.
On 5 minute bars (not shown) the VIXEN cross was at 11:15 and there was still pretty of downside action following that entry point with a lower risk exposure. The more comfortable you get with the VIXEN setup, the easier it is to execute on the 2 minute bar triggers . . always using a cut-loss stop.
Goldman lost 12% on Friday although I am surpised the volume was not higher. Based on GS's often suspected and now documented history of saying one thing while doing another I wouldn't be surprised if it's revealed later that GS itself made more money on Friday than any other day this year. You heard it here first.


jgpietsch said...

How do I sign up for that?

bzbtrader said...

Sorry to inform you that the Plutonium membership is limited to 100 subscribers and is currently full.
I will add your name to the waiting list.
Since I have a number of GS prop traders who are members there may in fact be some openings soon. Stay in touch.