Yesterday was a great session with stocks putting in a top and distribution selling stepped in right on queue. A lot of investments looked as though they were about to reverse. Bonds were set to rally, stocks were set to fall, dollar index was ready to bottom and volatility was primed for a pop. Members of my trading alert serviceTheGoldAndOilGuy were asking me why I only went long VXX and not all of them?
My answer to that is because they are all the same trade almost. If any of those fail to reverse it means the others will likely not reverse either. Thus we would have 4 losing trades at the same time. Instead I measure the potential profits and risk for each investment then pick the one which I feel has the best potential which happened to be the VXX trade I took yesterday. We pocketed 4.25% - 5% in one day and still hold a runner for much larger gains. This sure beats the performance of all the other investments we were looking at yesterday.
This morning's video analysis covers a lot of interesting and educational points on the market so be sure to watch it right now and stay ahead of the market.
Pre-Market Analysis Points:
- Dollar index looks to be bottoming as we expected on Monday.
- Crude oil is going to be choppy up at resistance for some time. No trade for weeks there likely.
- Natural gas is trying to break out of a mini basing pattern and I may get long UNG today.
- Gold, silver and gold miners are starting to have signs of a trend reversal to the upside but still not there yet.
- Bonds look to have bottomed yesterday bouncing 1%. I feel there is another 1% bounce left before it runs into resistance.
- SP500 is showing signs of distribution selling and has broken its first support trend line. With any luck we see another 4-5% drop is price.
- VIX moved higher with the SP500 yesterday as it broke to new highs. This is the opposite of what it should have done and one of the reasons why I jumped into VXX yesterday. Rising stocks prices and rising fear means the big money players are buying insurance for a drop near term because they are not confident about the new highs.