Let me precede this post with a warning: I am not saying that it’s impossible for equities to push any higher. Quite on the contrary – there are signs that indicate that we soon may run into a little short squeeze. If that outlook sounds contradictory to you then you may want to go back and read Volar’s excellent excerpt on platykurtotic vs. leptokurtotic markets which he posted almost a year ago. Simply put – it all depends – August is a good month for trend traders and if you are betting on mean reversion you may get burned.

Now as stainless steel rats we are sworn to trade by our rules (whatever they are) and to only take setups which strongly [...]

As I was perusing the comment thread this morning I saw a few musings on how to best get positioned near a potential market bottom. The option strategies that were suggested are definitely reasonable (i.e. regular credit spreads) but IMNSHO non-optimal during times of rapid volatility spikes.

In order to set the stage observe that IV as expressed by the VIX has jumped by 30% in the past month. Thus I decided to put a together a quick and dirty write up on an exotic beast called a ‘reverse calendar spread’ – a.k.a. ‘reverse diagonal spread’.

Let me however precede the following with a caveat – I am not suggesting that a market [...]

Obviously I’m reaching a little with this title as nobody can ever predict what the tape will do. However the purpose of this weekend post is to demonstrate that we have reached a level of retracement that now necessitates a bounce or equities may be heading for a crater near you. I have collected quite some interesting evidence today but let’s start out on the P&F front.

If you are a sub then you probably recall my time based charts which strongly suggest that SPX 1340 ought to be holding. And my SPX point & figure chart is basically saying the very same thing. What the regular chart may however fail to point out are the implications of a [...]

Events seem to be unfolding here a lot quicker than anticipated. At the danger of sounding like a broken record – I suggest you forget about the news and all the Euro drama once and for all. After all – did all that crap yesterday give you any idea of what would happen today? Of course not – the news is engineered to confuse not to educate you. It’s a mass mind manipulation tool and the less exposure the better. Instead recognize today’s wipeout as what it really is – an explosive resolution of obvious technical weakness that had been encroaching on several fronts. That’s it – there’s nothing else to say or think about. And [...]