ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Friday, July 11, 2008


closed out shorts

thanks to improving upside participation going back to june 27 in the s&p 500 and july 1 in the NDX, i cut and run on QID and SKF this afternoon once prices started to move north in earnest, at neither the highs nor the lows of the day.

of note, one element the implied volatility divergence i look at (a MACD on the index measures) reached oversold levels a few days ago, and the other element (spread between index measures and an intermediate-term moving average) will or will be very close today unless index implied volatility (finally jumpy after weeks of trepidation) crashes out the rest of the day. an average true range/cross correlation study is split -- the average ATR for an s&p stock is now some 12% over the 21-day average, an oversold signal, but other studies of correlation indicate a lower low is out there.

another view of index implied volatility -- the volatility curve, measuring the spread between the cash VIX and its 3- and 6-month forward futures -- jumped into oversold territory. same is true of the VIX:VXN ratio.

however, it's far from unanimous -- isee put/call sentiment data, for instance, isn't demonstrating the kind of negativity that usually marks intermediate bottoms.

i haven't the courage of conviction such that i went long. to be honest, i feel another downside stab is entirely possible next week -- possibly even something fearsome. notably, we haven't got the 90% upside day that often marks the beginning of tradable rallies to break a string of 90% down days. (the exception is in the IYF/SKF basket, which did have such a day on july 8 -- its first since may 1.) but an oversold bounce looks increasingly likely to me, and so i'm out to protect gains. it's okay to leave some money on the table, if that's what i'm doing.

QID gains from 6/3 amounted to about 16%. SKF gains from 4/22 came to a rude 59%.

i remain short the oil and gas complex via DUG, and hold a token short of FXI.


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