Bears Need Food – Not News

Well you already know my anti-news disposition…

Let’s examine the tape here – not the economy – not Europe – not politics. They are and always will be utterly irrelevant.

Example:

Volar’s friend (not a trader, but in “business”): Volar did you hear about Greece? I mean, the Euro finished? What about the double dip?

I say what about X & X & X & X & X fill in your blissful news filled line of ignorance here folks____________________. Well it is not ignorance- stuff matters. I am just saying playing old news and betting on it to matter makes no sense IMO.

The honey badger does not and will never give a LINK about news. He cares about who is short and how much.

Yes I heard about Greece the last 3 times I bought the stupid Euro and make a killing!!!  They have defaulted many times BTW. Panic must breed, if it stops breeding it dies. I am specifically speaking to equities, and now the Euro. It is not that I don’t think the market can go lower, but betting on ‘what if’ is a retarded idea. Markets are about human emotion, supply and demand of that emotion, and party interest.  If everybody is already short (per my last post on short interest and Euro COT data) and Greece defaults what happens? Who is to add shorts? And why would they not cover on the fruition of the event?

Ok now on to sentiment data. As usual, a hat tip must be given to Jason at SentimenTrader. He is one of very few I take seriously.

Now let’s look at volume. Why 99% of traders ignore this is beyond me – it is imperative to understanding the tape. For EVERY seller there is a buyer. When markets fall on high volume what do you think happens? Very simple to me – panic sellers hand over discounted prices (vis-a-vis market orders) to patient prudent limit order buyers. This is exactly why short selling the S&P can be very difficult to time.

Here are 4 measures of volume on one chart.

Do you see it now? After a panic day cover short! Once the market stops falling and volume reaches capitulation levels, the next move lower (especially on broken support with ZERO VOLUME) is to be bought.  Not sure if we are there yet, but we are freaking close. Price ALONE means NOTHING to me- volume AND price means everything.

Consider put volume and the VIX. Who sold the VIX north of 40? Me and the banks. The vega is so utterly high P3 wont even make a put owner money! Even if the VIX spiked to 80 (utterly unlikely given that Fearless and I have shown you that once it spikes the move is done), I get what? I get long at 900 and I sell my calls for a profit? Cool beans.

Here is the OCC total put Volume Chart.

Now for the subs – the premium stuff.

Here is the VXV Index.

I would not bet on the 2008 extreme. When we bottom, it will likely be a major low IMO.

Here is more on Rydex assets:

That ratio, again, has gotten really low. How much lower can it go?

Moreover look at the Implied correlation index.

A bit much eh?

Now on to sentiment surveys. I know many don’t believe in them, but the data works if one uses it as a tool (though I am not fond of the AAII data).

Here is the 4 survey index since 1998.

Clearly betting on the 3/120 even may be a bad idea. It is worth mentioning the survey with less data NAAIM was record low today. NAAIM is a survey of allocation, not sentiment.

Clearly we are extreme.

Now let’s look at Copper and the US$.

Copper:

Speaks for itself.

Now US$:

Speaks for itself. This may be early, but it is also a week old.

Finally I leave you with another indicator to watch- the AD Line.

If we make new lows we may have more to go, but otherwise get ready for the tape you are about to get… which will be a big… huge… massive.. steep… VIX collapsing…retail raping… bull rally.

Why? Well look at bonds…

A weekly hammer here would be telling IMO… we just filled the 2008 gap and tested the 2008 low. All of that money has to go somewhere….

Best of luck unbiased trading,

-Volar

*** look not even 1 seasonality chart 😛