The market has been acting nice the past few days and the Vix is acting like a bull market is upon us.
Becareful here. Take some profits in JPM and others that have rallied. I have been running around all week entertaining.
I added to my market short in the am.
Continued to add to my ERII position with today’s decline.
An argument for a continued upward push can be made seeing how the market is coming off of an oversold position. Especially for the Nasdaq via the QQQQ coming off of the SMAs and being oversold…
The SP500 is still seeing potential head wind, but a possible move to the 200 SMA may take place, depending on the psychology of traders next week. IMO, there is no economic catalyst at the moment that will drive the market fundamentally higher, but that is a ‘wait-and-see’ regarding the economic data.
What leads me to be bearish is the VIX. The level of complacency is too high in this current economic environment.
The VIX is at the low end of its long-term range within a bear market. The Vix is sitting on support and oversold. A possible move to 16 should not be ruled out, but I would feel very uncomfortable if it does.
We are approaching a complacent market, one accepting the slowing consumer stage of the bear market, but not fully realizing the slower corporate profits that come along with this stage. Also, a potential Black Swan is being ignored. Geo-political events are in an interesting place at the moment. So much so, I feel uncomfortable with the Vix going too low.
The Georgia-Russia conflict can lead to a scary domino effect of events. Obvioulsy this can be said about any conflict, but Russia decided to enter a sovereign state during the start of the Olympics (which is to symbolize 12 days of peace, irrespective of events). Then Poland gets missiles, ‘coincendentally’. We saw Russia react within the media, but how did they really react? Did they allocate resources to Afghansitan supporting the Taliban. What will the Russians really do to (or what move did they execute) to get back at the US for the Poland missisle? Then, how will the US respond? Will egos get in the way of economic development, and progress toward the worlds people? All I know is, this conflict gives me the ‘chills’ (pun intended 
).
Here is an interesting water article where a lot of numbers concerning industrial use are stated.
IMO, the most interesting statement within the article…
“Goldman Sachs, an investment bank, estimates that global water consumption is doubling every 20 years, which it calls an “unsustainable” rate of growth. Water, unlike oil, has no substitute.”
The article never mentions an answer, but the answer to this problem is desalination. And ERII is the best pure play to it, as virtually all desalination plants will have ERII products in them. (Not to mention has a very smart management team, who I think will really take advantage of this sector.)
1. Shorted the SPY, as indicated. IMO, the Vix is too low for the current environment we are in, as well as hitting support and oversold.
2. Protected my JPM holding via selling the Dec 40 calls against my common. (If I were to simply let the trade execute today it will effectively let me sell my JPM stake at 41, thanks to the premium of selling the option, versus buying at the common at 36. Basically I am saying I do not think JPM will go above 41 during this push upward.)
I am seeing signs of being oversold, and wanting an oversold bounce. But I am also seeing signs of downward pressure.
Possible scenario is that the market rises for a bit, maybe the SP500 goes to 1280-1290, then the risk is back to the down side. (Unless some fundamental positive catalysts get pulled out of a hat.)
Will look to add to my continuous market short via 130 Oct SPY puts if the SP500 sees 1280-1290.
Energy is moving up some this morning, and CHK is popping with it. I am making some changes… I will be playing the 47.5 Jan Calls. I am going to try to get them early.
I am interested to see if this pop causes a potential short squeeze on the futures, pushing up the equities a sizeable amount.
CHK looks really interesting here. It broke a resistance, and looks to want to move to the low/mid 50s.
Natural Gas may correct upward as well, facilitating the potential CHK move. NatGas is still horribly negative, but it is sitting on support and due to a correction, considering the fundamental demand for NG is still very alive.
I will be playing the 45 Oct Calls for the move, and will mostlikely unload the calls around 52. (I do like CHK as a long-term NatGas play, but the negativity in NatGas can not be ignored, so I am not buying and holding it.)
The SPY saw resistance with the 62SMA, and is now consolidating.
I have been cautious with the market, and will be everytime the market gets overbought. The VIX is my guide here, as it historically inverts with the SP before a bottom from this bear market can truly be considered.
Intermediate bottoms are obviously seen within bear markets (as we just witnessed one), and IMO, we will not see another one probably until 29 or so is seen. (The blue downward resistance line.)
Despite my caution, this does not mean the market will see new lows. I do not know if that is the case, (so I buy individual stock I like when my price points are reached) but ususally when the VIX spikes the markets goes down, so I short (to protect and for the trade).
Forgot to mention earlier, but I purchased more.
If it goes lower, I will purchase more.
