Pray For Confirmation
Alright, you bears asked for a glimmer of hope and tonight I finally can deliver something. But you better start praying to your favorite deity right now.
That’s right, start praying for confirmation tomorrow (not Friday or Monday) – because without it you bears are looking at a pretty meager X-Mas this season. Pass the dry bread please!
I left half an hour before the market closed today and at that time Mr. VIX was still below yesterday’s close. But I just checked and it seems that we indeed closed back inside that 2.0 BB. Now, as some of you remember, this close inside represents a 2nd step toward an equities sell signal (or VIX buy).
For the noobs – here are the rules:
For a $VIX confirmed signal you need 3 events:
- A close outside of the 2.0 Bollinger Band (20-day SMA) – check!
- A close back inside the 2.0 BB – this issues the signal – check!
- A higher close (sell) or lower close (buy) than the close of the day back inside the 2.0 BB – this confirms the signal.
So we still need a higher close for confirmation. Without confirmation no cookies – let’s be clear on that. That doesn’t mean the tape can’t go lower but the ‘odds’ are not as good – simple.
You all know I have become quite cautious when it comes to predicting bearish tape, especially since the daily Zero has been flat as a flounder as of late. But that does not mean I will dismiss any bearish evidence I come across. If we get confirmation tomorrow it will bestow an opportunity for the shorts – whether or not they can turn this into a meaningful correction with a dozen POMOs scheduled ahead of the midterm elections is of course another story.
See you on the other side – let’s hope we’ll see some fireworks tomorrow.
P.S.: Anyone who asks me a dumb question about those VIX rules will be shot on the spot. Plus his/her entire family will be enslaved in a North Korean work camp. You have been warned.