Wednesday, April 21, 2010

Tracking the Day

Here are 3 sequential views of the market using the Indices watchlist and the Strategy Matrix focused on the VXN (Qs volatility index). The first view is one hour into the market, the second is 4 hours into the day and the 3rd is posted at the close.
At the end of the first hour the VXN is skewed almost 3:1 down = Qs postive. The Qs at this time are up .34%, while the SPX is flat and the IWM is down .01% . . essentially flat.
Note that the VXN is down 2% and the QQV is down 4.7% . . both bullish for the Qs.

At midday the metrics are only modestly changed. The Qs are still at +.36% and the VXN and QQV are still tracking the first hour values. The Matrix has eased a tiny bit but we're still seeing a 23:13 neagtive skew = positive for the Qs. This has the feel of a consolidation day and I'm not expecting much excitement for the afternoon session.
The IWM has picked up some positive momentum, while the RVX has also gained .3%, so we've got a divergence on the IWM that may be worth keeping an eye on. Typically we see this kind of "testing" before a reconcilation of the divergence.

OK, I've changed the look of the Watchlist for the EOD panel just to see of you're paying attention. I've deleted the volume column as it's effectively meaningless for the majors and yields no values for the $ type indices except the DJ.
At the close our midday forecast for a dull afternoon with possible action at IWM is proved correct. The VXN Matrix is now dead neutral at 18/18 while the Qs themselves are just a few pennies off the 1st hour and midday values. Ditto with the VXN and QQV = a sleepy day for the Qs.
Of note is the late afternoon IWM bump accompanied by a 1.3% drop in RVX . . just the type of inverse correlation we expect from the IWM/RVX. If you look at the 2 minute VIXEN setup of the IWM/RVX (not shown) it should be crystal clear that the last hour of the day was a great IWM Long opportunity that would have yielded a quick $.40 for 45 minutes of exposure . . a classic VIXEN trade.

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