Click on Chart of VIX to Enlarge
This chart is VIX hourly with standard bollinger bands as well as a longer term deviation band. When the VIX approaches or touches the lower long term band and the bottom standard bollinger band moves below the bottom longer term band, the market is often near a short term high. It shows that the volatility or "fear" in the market is relatively low and may be due for a price decline in stocks.
That is basically right where we are at right now in conjunction with a nice bearish trade set-up which was posted yesterday. I have purchased SPY May 210 put options for 3.00 today. There is not a lot of room to the upside before the trade set-up shown yesterday is failed. And price has come into the resistance zone with further divergences today, suggesting that a short term top still may be forming today.
I am still holding the XLF puts purchased a few weeks ago. I am awaiting a buy signal or panic extreme in my trading system in order to exit the near expiration puts (April and May).
If entering the SPY puts above my suggestion at this point is to place a limit order to sell the puts at 9.00. That would put SPY back near the recent low end of the trading range and fill the gap up from 2/3/15.
Pete
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