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US Equity Market Update 6-28-16

A midday update covering the key support & resistance levels on the US stock market via SPY, QQQ & IWM, along with my current trading strategy.

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Jun 28, 2016 12:47pm|Categories: Equity Market Analysis|Tags: , , , , , |13 Comments

13 Comments

  1. dan123 June 28, 2016 1:53 pm at 1:53 pm

    great video, thanks for the update

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    • rsotc June 28, 2016 2:30 pm at 2:30 pm

      Glad you enjoyed it Dan. The video ran a bit longer than I had expected but I was able to cover a lot more than just the key support & resistance levels to watch in this one. As stated in the video, I favor a resumption of the downtrend with the likely trigger to be a break below yesterday’s lows.

      I’m also continuing to monitor what appears to be a clear deterioration in economic fundamentals, which the market should begin to rapidly start pricing in once the Brexit smokescreen begins to dissipate. Today’s GDP release helps to affirm the fact that the US economy appears to be headed towards a contraction/recession as the trend in GDP growth remains lower while now hovering just above contractionary levels. Let’s see what Thursday’s Jobless Claims (8:30am) & Chicago PMI (9:45am) brings.

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  2. astoria26 June 28, 2016 3:39 pm at 3:39 pm

    Hey Randy, since we’re in a clear bearish downtrend, what’s your favorite trading vehicle to short the market? Is it options? Trading the VIX via UVXY or TVIX? Shorting the 3x leveraged ETFs like UPRO or TQQQ? Lately I’ve been buying TVIX which has horrible decay, so I wanted to see if there’s better options. Thanks in advance for your advice!

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    • rsotc June 28, 2016 10:13 pm at 10:13 pm

      @astoria26 I can’t recall trading any of the $VIX tracking ETFs in years, other than maybe an intraday or 1-day trade here or there. My favorite vehicles for shorting the market are individual stocks, sector ETFs & broad index ETFs. Particularly with sector ETFs, I like to short the 3x leveraged ETF that is positioned in the opposite direction of where I expect price to go, such as the LABU, GUSH & NUGT shorts that I’ve posted taking in the trading room over the last few months (still short with all but NUGT paying off so far although I was able to book partial profits on the recent GDX correction).

      Here’s a post that I made regarding trading the $VIX a few years back, including why I typically avoid the $VIX tracking ETFs: http://rightsideofthechart.com/trading-the-vix/

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    • rsotc June 28, 2016 10:26 pm at 10:26 pm

      To add to my reply, TVIX is probably one of the worst of the VIX tracking ETFs out there. I posted a chart of NUGT a while back highlight the nearly 100% loss if held since inception. TVIX is even worse, showing a 99.99% loss since the Oct 2011 high (pull a long-term chart). While a break-even or profit above your $4.xx cost is still possible, you should consider picking a stop (or few stop levels to scale out) just in case this market either rallies for a few days, weeks or more or even grinds sideways for a while, which is also likely to bring the $VIX & TVIX down substantially.

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      • astoria26 June 29, 2016 3:11 pm at 3:11 pm

        Thanks so much Randy! Yeah I was hoping Brexit would move TVIX up, but it didn’t quite reach $4. I guess I had to learn the hard way, will be scaling out at the next opp.

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  3. GetItRiight June 28, 2016 3:42 pm at 3:42 pm

    Hi @astoria26, you are clearly new to the site and haven’t seen my post regarding the bad experience I have with TVIX as a shorting vehicle. I will only say to stay away, get out as soon as you can.

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  4. astoria26 June 28, 2016 3:49 pm at 3:49 pm

    @GetItRiight I totally know what you mean, but I’m kinda stuck in it, $4.xx avg right now. I remember seeing you mention you had a high avg too at some point. What do you use now to short? Would shorting the opposite XIV help any with the decay?

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    • GetItRiight June 28, 2016 3:56 pm at 3:56 pm

      I just bought some SQQQ as I don’t have a margin account, otherwise I would have shorted TQQQ. I believe this is Randy’s preference as well as shorting TNA for the Russell (sorry Randy for speaking on your behalf).
      Shorting XIV doesn’t work as that instrument goes higher 80% of the time. You could average down in this area and sell the same amount on a pop, then wait for another move down to buy in and average down until you come out even. It is pretty risky but the only thing I see as a strategy. Once you are out, stay away. 4.xx is not a bad average, I am in at 6.37.

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      • astoria26 June 28, 2016 4:11 pm at 4:11 pm

        Thx, I am hoping to avg down to $4 or lower, then sell all of it when the market takes its next leg down, just to get out. I had some success last fall with TVIX, where it bottomed at $5.50 or $6 I believe and didn’t keep going down and decaying like it did this spring. What happened with your shares, did you just get out at a loss? I think there’s also a seasonal thing with TVIX, maybe wait til Aug or Sept when the market always seem to go through a big correction.

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        • GetItRiight June 28, 2016 4:18 pm at 4:18 pm

          I still have my shares. Holding until October the latest, most I can lose is what I invested. If need be I will average down one more time, probably to a 2.5 level, if we get to a 1 handle.
          This thing lost more than anytime in its history, percentage wise, from the Feb highs to the Jun lows. Not even last year was it this bad when we were in a bull market. Manipulation at the highest level. See today’s action as well. Never again.

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  5. Art June 28, 2016 5:10 pm at 5:10 pm

    ?The combination of losses due to the 2X structure and contango add up to typical TVIX losses of 15% per month (85% per year). This is not a buy and hold investment. If you do not understand the way TVIX, UVXY XIV etc works SIX FIGURE INVESTING .COM has some very good research to read for free. Also VIXCENTRAL.com shows the term structure daily of the VIX.
    These are very dangerous(to your account) items to trade if you do not have a good grasp of how they work and when it is appropriate to trade them. They can also make you a LOT of money but I would only recommend them to expert traders experienced in their use. I am not implying that you are not a expert trader by the way, I enjoy your posts, just saying anyone should be careful using these.

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    • rsotc June 28, 2016 10:30 pm at 10:30 pm

      Well said & so true. Thanks for the info & the recommended sites/links Art.

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