Bear Growling In The Distance

Forget it, you will never be able to outrun a bear, no matter how fast (you think) you are. Bears have repeatedly been observed to not only achieve running speeds of about 35 mph but also maintain that pace for over two miles without as much as breaking a sweat. Compare that with the fastest human being on earth, Usain Bolt, who is able to reach a measly top speed of only 28 mph and that for about 100 meters plus minus. Lesson learned today: Never ever attempt to outrun a bear (or Usain Bolt), try to use your head instead.

So what’s all this talk of bears and running speed? Well, it just so happens that the VIX painted a new all time low of 8.84 last week and given the current advance that record may be broken yet again this week. So the crazy notion of a possible market correction does cross a trader’s mind of course. Plus today marks the last trading session of this month, which is why it’s time for another EOM momo update:

You probably recall the CBOE SKEW which I have featured here for the past few years. The nutshell story is that it was a great idea in principle which however doesn’t work well in practice. Meaning the SKEW – on its own – has zero predictive qualities. Taken in context, in this case with the VIX, it has a pretty good application for anticipating bottoms. Tops unfortunately not so much. Per the signal the bulls are most certainly on notice but the problem is that during this bull market the bearish reversal signals don’t work very well. Which is why I am taking this one with a heaping of salt.

So how about the VIX:VXV then? How does quarterly IV stack up against 30-day IV? Bearish again per my signal and those seem to offer a bit more credibility. On a long term basis only however, which means that there is POTENTIAL for a correction which sometimes winds up being nothing but a little dip. Once again these observations are most likely only relative to the current bull market and I expect dynamics to change once we finally get another bear market sometime in the year 2078 – plus minus 

The VXV:VXO (latter being the old VIX which mainly considers ATM strikes) actually seems to work best for signaling potential turning points. And that one almost poked me in the eye this morning with what must be a new record high signal ratio. In other words ATM premiums are currently at maximum discount, and it’s not that VXV jumped by a standard deviation or anything.

For shits and giggles (yes, Evil Speculator has finally embraced political correctness) I’m showing you the hourly version as well which is a bit hit and miss but I’d say it’s got a 3:1 success rate. YUGE signal again and one you’d think will lead to at least a tiny correction.

And finally our CPCE Deluxe, which has been brilliant on the long side and pretty decent on the short side as well. Unfortunately however this year it keeps producing bearish threshold reversals which continue to be ignored. Which of course explains the VIX plotting below the 9 mark.

Bottom Line:

Does that mean I’m buying puts today? Hell no – especially not during the middle of summer. I would need to see a lot more correlating evidence before I would even consider exploratory lottery tickets. BUT the bear is most definitely growling in the distance, which once again leads me to emphasize that long term IV protection for your delta positive portfolio has never ever been this cheap.

Campaign Updates

Soybean Oil – winner winner chicken dinner. I actually didn’t realize that spike was in the works last Friday, otherwise I would have taken partial profits. For now I’m putting my trail a little bit above the 1R mark. And so should you!

Silver also shining bright this morning and it’s now time to move our stop to the break/even mark. That was a great mid-trend entry which many people seem to have a psychological problem taking. Probably a post for another day…

Nice goodie again below the fold for my intrepid subs:

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