Market When Closed, Sunday 26 January

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Fear Or Lack Thereof

by Alex King, CEO, Cestrian Capital Research, Inc

This is the chart I am watching most closely right now. This is the Vix index which is variously described as !!OMG THE FEAR INDEX!! (on CNBC) or a measure of demand for longer-dated S&P500 puts (Brains Trust aka. Jay Urbain - here).

(You can open a full page version of this chart, here.)

You can trade Vix instruments themselves, and that's OK (I am presently long $UVIX and also long $UVXY calls, with modest allocations in each case), but I find a more effective way to benefit from Vix oscillations is to wait for one of those spikes - either up to that horizontal resistance zone in red, or, better, one of those Yikes Cat moments like August or December last year, make sure you are staring at charts and not listening to the vomit-y feeling that lives somewhere in your brain-liver-gut-axis, and buy something scary like $TQQQ or $SOXL or just plain ole $QQQ. Then wait for the volatility to drop, or, better, a volatility crush, and sell. Much nicer returns that way than trying to win from volatility pops which in my experience are unsatisfactory affairs.

The long-term charts in equity indices look reasonably positive to me but we are hovering below technical levels that could mark long-term reversal levels so I believe one has to watch carefully at present. Large, price-setting institutional investors have made easy money since they were accumulating the S&P, the Nasdaq and anything else that the poors had been scared away from during Q2-Q4 2022. So if things start looking shaky you can bet they won't shy away from taking some of those gains, the better to look smart with clients.

Let's get to work. But before we do, a word from Gains about, er, gains.

Bull Or Bear, Gains Doesn't Care

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Well, those charts won't draw themselves (yet - when AI nails this I plan to play more golf. Or at least learn to play golf. Maybe).

Short- And Medium-Term Market Analysis

If you want this daily dose of pattern recognition, and you aren’t yet a subscriber of course, you can read about and choose from all the subscription services that include this note, here.