The last trading day of the new year saw the Vix spike +8%. That is an impressive spike for the last trading day of the year, along with a flat end-of-year week.
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In my opinion, the 8% rise is too strong of a move for a relatively quiet day. It is giving a false sense of fear and negativity. Hence my belief that the final week of the year was a means of consolidation, and the rally should continue.
But the market is a probability game, so despite my belief in a continued rally, if the market continues to decline into next week, the Vix should continue to rapidly rise, indicating a 'buy' signal. That should take place within one or two days.
With a market rally, I still think the Vix will break down to its lower limit to the lower dotted horizontal red line.
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To me, this decline in the Vix will indicate market complacency, and that is when protection needs to be implemented. And that is when I plan on purchasing the SPY puts. (The move is independent of time. It could take a day, a week or two weeks.)
With this market move, most likely COST and GS will be in a position to which I will need to sell calls to protect. But confirmation and exact timing will be determined as per the individual charts.
Thanks so much.
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