Monday, March 9, 2009

PCR Whiplash

I had said going into today that as long as VIX stays above 49, the trend downward in the market will continue and we are still on our way to a capitulation sell off. While I still feel that will happen, I have some reservations.

Late in the day there was some very heavy volume on VIX puts. The VIX PCR was around .10 (extremely low and extremely bearish) until the final few minutes of trading. There were some very large Put orders filled at the end of the day. The question is, were these one bulk naked put write orders or were they single put buy orders? I don't have that information but it does make quite a difference. They were all round lots of 1000's (10,000, 4000, etc.)

The prices on these were at the market price. Someone wanted them for sure so I have to assume these were buy orders and filled as they could, or MM's filled them automatically due to the market order condition and will balance them later.

These trades swung the VIX PCR completely around. I want to discount it because it could just be someone hedging or gambling a bit. Buy why gamble on the VIX? why not load up on something more volital?

Anyway, actions on financials were mixed regarding PCR. There is no clear indicator of being oversold or overbought at all. Therefore, there are still plenty of longs out there trying to time the market rally. They are getting beat up on every move up in the market. This game has got to be getting old for them. But they continue to jump in hoping for that recovery rally that just has not been there.

With the VIX action today, I do feel good about holding FAZ overnight. that said, at the end of the day after seeing the heavy put volume on the VIX, i did a knee jerk reaction and bought some FAS calls as a hedge. I wish I hadn't now, but I did and will unload them as soon as the market settles down in the morning and the signal is clear.

I continue to be very bullish on SRS. I have almost forgotten about my shares. No chance I dump those anytime soon. I am also bullish on GOLD. The "hyper-inflation" fears are starting to resurface. Gold will move up well before inflation actually hits us. Gold is a long term play, not a short termer.

Speaking of Gold, I was looking over my gold coins and my favorite are the Krugs. Just look really classy. The American Eagles are my second favorite due to the detail. The Maple Leaves are my third since they are very plain. Either way, I love them all because they allow me to sleep at night and they are making me money right now.

This is a wonderful market, folks. This is a once in a lifetime opportunity. We will have large swing moves coming up and if you hit it right, you could be cashing in big time. It happened in 2001 and I was on the wrong end of it. Not this time.

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