Aug 11

Weekend outlook for 13th August 2012 – Calm before storm

Wow – what a B-O-R-I-N-G week this was ,, markets barely moved all week long , we started at SPX 1390 on Monday and ended 1406 on Friday ,, a 10 point range choppy up and down in low trading volume!

But enough with that ,, I were long from Thursday via XIV at 12$ when SPX traded around 1355-1360 and sold all longs early this week (Monday Tuesday) with nice profits where I began buying heavy into shorts and UVXY.

Right now I’m extreme heavy on the short side as of Tuesday the 7th August when SPX got all the way up to 1307 – and so far I’m still holding shorts tight over weekend.

The interesting thing about this week is markets is up 6 days IN A ROW – and usually when markets up so many days in a row , there is AT LEAST a good size pullback coming , looking back in history.

So either way if you are bullish OR bearish – then a pullback is no matter what very imminent.

The only thing which has been very weak is VIX , as VIX continued to go down, but lets take some time to review VIX.

1. VIX closed BELOW 15 on Friday before close which is near the lowest level for this year and past years. A VIX reading below 15 has MARKED MAJOR TOPS in the past 2 years, it marked 2 of the highs in 2011 and it marked 2012 highs so far,, so will this be different? ONLY IF YOU ARE BULLISH and think we are in a bull market and go to new highs and way beyond,, then VIX can stay this low,, but as my analysis and thesis tells me this is just another suckers rally since June, I think this ONCE again will mark a MAJOR top in the markets with VIX at lows.

People should imo be careful going long when VIX below 15 and be aggressive going long when VIX at 30s ,, you dont go long when there is no fear in markets as the fear easy can spike.

2. As mentioned SPX up 6 days in a row usually by STATISTICS bearish

3. There is still MAJOR bearish divergences over the daily chart – tells me that this rally is near done and can turn around sharply very soon.

4. SPX looks like being either in a bearish rising wedge since June lows OR some kind of BEAR flag , both look bearish and will suddendly breakdown to downside.

5. We enter the timezone now for some very bearish cycles, especially MID this week around 15th August

6. As you know I’m a swing trader and the upside is very limited, we MIGHT have a mini gap up on Monday wont rule that out, but the upside would only be 1409-1410 imo and then down the road from there. I think as we get closer to mid this week markets will turn VIOLENTLY down and we could see 1340-1360 which is my target for this week. Its option expiration week so I think they wont sell off extreme heavy yet, after option expiration some heavy selling can occur !

7. TLT reached my target of 124 I called for 1 week ago and I think it bottomed, so when TLT rising markets will fall.

8. Those following Tom Demark signals got a weekly SELL signal for this week

CONCLUSION: All in all I think this is a suckers rally from June lows , we called the lows in June and said that upside were very possible and back in June we mentioned markets could rally to 1390-1400 (when SPX was 1300) , but it has taken WAY longer time to get up here which IMO is a weak sign for bulls. I think we will start to see much more voilatility starting this week and as we get closer to Wednesday I think markets could go down fast. Target for this week is around 1340-1360 and all signals I see points to this being a major top and I dont believe SPX will go above 1422. I started going HEAVY in shorts on Tuesday when markets were up at 1407 7th August and Im holding all shorts tight. Even if we gap up little Monday I still think we will go down hard later on the week. I will put a stop on my shorts in case SPX breaks above 1422 (as I really dont expect we will do this, but in case we do I will stop out above 1422 SPX)

So all in all , bears ready to strike back very hard with an extreme lows VIX and major bearish divergences in markets. This week was like calm before storm ,, so I think we will start to see some better moves this week. As you know I’m a swing trader and want to catch the bigger moves , so I dont care if SPX gets to 1410 before heading down. My downside target for SPX is eventually 1200 late August/early September – so get ready for a great ride down in markets. I remain heavy long UVXY 5.55 as of Tuesday this week and holding all.


 

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