Friday, January 16, 2009

Weekly Update

Last week's update pretty much abandoned my VIX60 hope and instead forecast a VIX50-55, which turned out to be eerily correct. Projections like that and the whole butterfly scenario (updated below) are greatly facilitated by using linear regression studies like the LR30 channel, and of the many TA studies available to traders, this one remains one of my real workhorses for longer time frames. For those who haven't checked him out yet, Richard Muelhberg, uses the 3 LRs for daytrading a wide range of ETFs and futures and has an excellent, and very modestly priced, trader training service. Best of class (LR30 channel behavior) is the XLE. With the dunce cap in the left corner is the XLF, which is just plain awful looking. (Will somebody please give Barney Frank and the Senate Banking Committee a good cattle prodding to get their act together?)
Distinct divergence between daily and weekly signals on the VIX and the T2100 (advance/decline line), so next week should be interesting.
With all 4 of the ETF basket coming off extremely oversold RSI2 bottoms or double bottoms, the odds favor a surge for at least a few days, although a couple good pops could easily swing things back into the overbought range. Most of the BZB Dirty Dozen support/resistance systems are on BUY signals, but based on current momentum many also look to be quickly approaching a neutral stance.
Butterfly Update:
The XLE Jan 47 butterfly played out perfectly and based on the current LR30 channel, I'm inclined to do it again. More than likely I'll wait till next Wednesday to see out the long weekend effects the markets before jumping in. With the plethora of bad news streaming out, the odds don't favor a trend change at this time (IMHO), but stranger things have happened and if the Gaza situation gets resolved (unlikely), or if some of the majors give guidance higher (unlikely), then I'll look to close some of my neutral positions such as the XLP butterfly which is still right on the money, as is the XLU butterfly.

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