And now things are getting very interesting! Fortunately my homework and pre-market post paid off despite coming into today leveraged long!
7/1/2017: "UVXY is a deathtrap, but maybe worth looking at in weeks ahead."
7/6/2017 pre-market comment: "If VIX moves and stays above its 2HP / Q3P combo at 12.28 I will be de-risking. VXX / UVXY are death traps but as mentioned in latest Total market view it may be time to give them a look. XIV likely opening below its JulP 81.56 and then more support underneath at Q3P 77.76 and then 3HP 73.15. UVXY JulP is 10.14 and as it turns out weekly pivot exactly there so a jump above has a defined r/r [risk-reward] level."
If you are a regular reader of this site you know that pre-market comments are extremely rare.
UVXY open today 10.32, close 10.95, so taking out the gap was about 5.8% assuming some slippage on the open. 5.8% on 2 positions took care of the damage that would have incurred today. Do the math. 2 positions for 11+% gain made up for 12 positions that averaged less than 1% loss. Recent adds on XLF and INDA held up better than most other indexes that I track.
So on to markets. Today was one of those days that happen a handful of times in the year. What do I mean by that?
SPY YR1 break and JulP resistance - still above Q3P
QQQ YR2 rejection and below Q3P
DIA YR1 break!! Just fractional however, and still above JulP and other pivots
IWM slam - testing Q3P and 2HP
VTI YR1 rejection and JulP resistance - still above Q3P; ps, I haven't mentioned this one in a while, but NYA near YR1 tag on 7/3 and since then DOWN. NYA continues to be a very reliable confirmation on both sides of the trade.
VIX above 2HP, Q3P and JulP
XIV JulP break, still above Q3P
In sum, bearish action on 4 (!) yearly levels (i am still kinda counting VTI & NYA together as broad indexes) and VIX jumping above a long term pivot. Market may bounce tomorrow but this is the environment to *protect capital* not hope for a bounce!
TLT and GLD were down as well, and seeing this in pre-market led to conclusion that VIX had to explode - hence the timely UXVY call. The way I played it - put on 2 UVXYs for the open, then decided to see if VIX finished the day above 2HP or not. Since it did, de-risked as called.
Keeping: 2 INDA and 2 XLF, 2 SPYs, 1 UVXY
Cut: 4 SPY, 2 EEM, 1 UVXY on close for healthy gain
Portfolio 120% long yesterday, today 50% net long although that UVXY has likely more % move than just 1 unit. I will probably cut the UVXY tomorrow unless VIX continues to launch above its 2HP and XIV breaks the Q3P.
Are there any +s?
Not much, but a few:
DIA within striking range of reclaiming YR1, and still above all pivots
VIX within striking range of falling back under 2HP / Q3P
TLT and GLD down - money has to go somewhere, potentially bullish for risk especially XLF
Maybe this is junior varsity selling and the pros will come back and buy next week. Possible! But for now, I rarely regret taking defensive action when VIX is jumping above long term pivots. Other notable examples include days like 8/20/2015 and 10/9/2014. Check the charts and you'll see. But when those VIX levels turn into resistance again, I'll be a buyer.
In fact, 7/6/2017 is the first day since 11/4/2016 that VIX has closed above a long term pivot! And since I have gone on and on about Dow YR1 for the last several weeks, a break of this could be HUGE with any follow through tomorrow.
SPY, QQQ, DIA, VIX, XIV and UVXY below. Arrows on the yearly levels that are so crucial from here.
