really not much to add that hasn’t already been said in the last few weeks: on one hand, we’re in one of the most relentless uptrends in a long while yet on the other hand, red flags abound. i continue to firmly believe that the risk/reward to being heavily invested in this market is about as bad as it gets. i’m sure most people don’t understand that statement or dismiss it as the ramblings of someone who does not “believe” in this rally or the fact this is just the beginning of the next leg up in a powerful bull market. maybe, maybe not but what you have to realize is that the two attributes of the current market (strong uptrend and multiple warning signs) are NOT mutually exclusive. in fact, the strongest rallies and sell-offs usually follow or precede each other. just pull up any index and take a look at the sharpest corrections, then look at the price action leading up to those sell-offs. vice-versa with the strongest rallies (usually preceded by very strong corrections…including this current rally).
again folks, i don’t want to beat a dead horse. i’ll continue to post the best looking set-ups that i can find, both long and short, and leave it up to you as to which trades to take, if any. personally, i’ve been keeping thing light for a while although i do believe the R/R is really starting to stack over to the short-side at this point and i’ve been adding to select short positions today.
here are the update VIX and VXN charts and as you can see, the continue to remain on “buy” signals (sell signals or at least warning signs for the stock market). as i mentioned in my last VIX comments, there is the possibility that the VIX moves lower to the support levels marked and stays low for some time, as it did after the last major breakout. however, i favor the more bullish (bearish for the stock market) scenarios below where the VIX begins to rise shortly and the market starts moving lower, most likely with increasing downside momentum. most importantly, if you are unsure of what to do or you have a low tolerance for risk, sitting aside for the time being is most likely the best strategy.
