When good passive investing turns bad. Hopefully we get some rationality back in the market. We need a clear out if dead weight. With government aid beginning to roll off perhaps we are setting up for more of a W shaped recovery having completed V.

Hi Randy,
Can you comment on how the option expiry effects the VXX trade? Would you expect the VXX to start behaving more normally (more aggressive moves up with falls in QQQ) once we get past the option expiry?

I agree that rotation out of the bloated FAAMGs is underway, likely with more to come. Can’t speak to SNOW (tried to short it the day of the IPO but there weren’t any shares available for shorting yet) other than it appears to be another sign of a tech bubble. If/when the FAAMG/tech bubble pops, it will most likely drag all things tech as well as most other sectors down with it. It’s simple math, really. Too much concentration in those ultra-mega-cap stocks in the major indices that once the tide turns (from inflows to outflows/buying to selling of the FAAMGs, it will drag the indices lower & selling will beget more selling… a vicious cycle.

Go watch his monologue from yesterday’s Mad Money … it’s as if he’s been watching Randy.

Thank you very much!

NIO & WKHS both in confirmed uptrends (no sell signals at this time) but with negative divergences forming on both so not the type of uptrend that I care to chase. I think there is a small bubble in the electric car market, a la TSLA & when TSLA finally breaks the uptrend line off the March lows, especially if it fails to get back above its post-split highs soon, the electric car stocks will likely be looking at a 50%+ drop. JMHO, of course. Here are my daily charts of those 3.

Completely up to each trader whether to give VXX a little room beyond the suggested stop. I’m not going to change the suggested stop since QQQ & /NQ have so far defended the key support at the bottom of the trading ranges with the 60-min divergences still intact. Maybe consider a daily close below 24 if you haven’t already stopped out yet. QQQ is still hovering at the bottom of the range & I would suspect if it is going to break down, it will do so later today or early next week.

It’s just like Justice Potter’s definition of pornography in Jacobellis v. Ohio. When asked about what constitutes pornography, he said “I’ll know it when I see it.”
Ideally, but not always an absolute requirement, you want to see a breakdown occur on above-average volume (1.5x or better). A solid red 60-minute candlestick close below the recent lows would certainly help & of course, impulsive selling, As I like to say, “the redder, the better” referring the candles that accompany & follow the breakdown. e.g.- Look at the price action that followed the breakdown of the minor uptrend line on /NQ on the Sept 3rd breakdown… that was textbook confirmation of that sell signal. We don’t always get such a clear green light to short but that sell signal was about as good as it gets.

That’s my read on things & while that is my opinion, one cannot argue that the drop in the $VIX since the breakout & initial surge when the correction started does mean exactly what you are saying (the majority believes the drop is over & have been buying more calls than puts).
At this risk of oversimplifying things, it essentially boils down to whether on not QQQ solid takes out the recent lows with the current bullish divergences failing to result in a substantial rally or not. A break of the recent lows (other than another marginal new low followed by a reversal) should open the door to another 6%+ downside in the Q’s, dragging the $SPX down with it & spiking the $VIX. No breakdown, no T2 or T3 in VXX, at least not anytime soon. Still favor the former vs. the latter but need to see those lows get taken out.