Looks like we are at a bit of a crossroads in the indexes sitting at the upper end of consolidation ranges. It will interesting to see if we continue moving up, if so this will probably mean breaking previous highs in many of them. What happens for the long term in upcoming months is a different story as the volatility has ramped up quite a bit and from a much larger time frame one might want to start looking for extended weakness as the chop and froth bubble further. Given that the economic recovery has been a very gradual and slow building one, I am more inclined from a fundamental standpoint, much of this is priced into the market. If one believes that is the case, the currently fairly high relative historical valuations and the increase of much more capital from both the debt and equity side entering the market makes me believe a longer term correction is not unwarranted, technicals aside.
As of now the indexes could be ready to break out this week or retest their bottom end of consolidation zones before making decisive moves in either direction. I am currently inclined to think we will go north of where we are sooner than later based on the recent burnout in VIX. Below is a study from 2011 from
Rob Hanna's studies referencing such events.
Urban Carmel's the Fat Pitch also mentions seasonality in his post this weekend amongst other factors. It also includes quite a good review of top forming churn at the last long term cycles going back to 2000.
Saturday, January 24, 2015
Still holding $RIG Mar2 and Mar16 calls which are up 100-200%. $shak settling nicely and I have plenty of time with Jun 45 calls
I am liking the set up for XLE a lot now and XBI I am hoping for some settling so I can board the train. Maybe within 1-2 weeks? Missed ...
Didn't make any changes Fri except close the GLD short as the miners + silver started showing strength and an oversold signal on the 2 h...