Just Because You’re Paranoid

I’m sure you’ve heard the saying – just because you’re paranoid doesn’t mean they’re not out to get you. A humorous quip I use from time to time to break the ice at parties but frankly speaking my prime directive when it comes to trading equities these days. If you weren’t busy yesterday wrapping some junk in preparation for your beloved in-laws’ Christmas visit then you may recall the following VIX:VIX ratio chart:

And of course down we went today – not very much I concede but probably enough to shake out a few weak hands. Divergences on this chart have often kept me out of trouble and that’s why I keep it handy. Now – this is where we’re at on the equities side right now:

The S&P cash briefly revisited yesterday’s lows today (see above musings on shaking out weak hands) and unless we punch quite a bit higher we should be the happy owners of a bonafide RTV-L setup – starting tomorrow of course. Once again, you can play this one off the ES futures which should make it easier to catch an entry, especially if it happens overnight. Wouldn’t be the first time. Our stop would be at SPX 1777.05 or use today’s low on the E-Mini at 1770.25 (recall we just rolled over and fair value is wide).

However, my this is not my favorite setup on the equities side today – please grab your secret decoder ring and step into my lair:

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Cheers,