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Stock Markets Rolling Over

Stock-Markets / Stock Markets 2015 Oct 16, 2015 - 03:54 PM GMT

By: Anthony_Cherniawski

Stock-Markets

SPX appears to have turned precisely at 9:34 am, 86 market hours after it reversed from its low on September 29. There was a combined PC/TC low due on October 1, so the bottom was 2 days early. It is possible that the perception that SPX could not make a new low that drove the buyers back into the market at the end of September. Once it took hold, the market took off.

Sunday is scheduled as a Primary Cycle high, so the turn is expected. Despite the aggressive nature of the call, you may wish to go 50% to as much as 100% short at this juncture. The market may linger her for the rest of this morning, but I don’t think that the retail options will do as well as the Index option fared this morning.


Read on. There are further explanations below.

VIX took precisely 12.9 market days to decline from its high on September 28 until this morning’s low. The anticipated low from the Cycles Model (PC /MC) was originally due October 7 and VIX first touched its Cycle Bottom (a potential reversal point) on October 8. You can see the zigzag extension form the 8th to today, adding on 8.6 calendar days to the Master Cycle low that is apparently being made today. Investors using Cycles as a mechanical Model would not have fared badly if they had switched positions on October 8, other than a test of one’s patience.

For whatever reason, investors are still bearish on the VIX. I also believe that they have been helped by the HFT-driven hedge funds, trying to squeeze the last dime out of their SPX calls…and VIX puts.

VIX and its ETFs have a triple Primary Cycle high due on October 30.

SKEW has raised its profile again, today. And it has made another all-time high.

ZeroHedge reports, “Since we first exposed (and explained) the Black-sh Swan-link nature of the options market's Skew Index, the mainstream media has lept to various conclusions (from ignore it, like everything else, to 'wow'). However, what is crucial to comprehend is that the soaring Skew is occurring at the same time as a collapsing VIX.

And stunningly, what we have seen over the last two days is somewhat unprecedented - VIX has continued to collapse into option expiration (and we know the pattern that occurs after opex)”

Regards,

Tony

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As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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