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Sunday, August 8, 2010

Market Thought... still waiting

Still waiting to take out real market protection. As my 'tell' to complacency is a chart I have frequently posted (but not in a while).

The general pattern here is fairly obvious. The focus is the blue-overlay line (the VIX) in relation to the SP500.

The pattern here to short the market (or protect) when the blue-overlay is at the low end touching the lowest blue horizontal line, while going heavy short when touching the lowest dotted red horizontal line.

The blue-overlay is approaching the lowest blue horizontal line, and when that happens I will take on a few SP500 115 Oct puts. (If it the lowest dotted line is achieved I will add to the protection.)

The only thing that will make me hesitate on market protection is if we start to see better than expected job numbers. IMO, that will unleash a torrent of money itching to get into this market, and start raising stock prices to more normal levels.

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