VRA Crash Update: Do Not Fight the Tape, Do Not Fight The FED
/Jan 13, 2016
The markets are rolling over hard. Opened 100 points higher (DJ), and as I've said each and every day, "Sell/Short any bear market that opens sharply higher" This ones a real Investing101 folks...and now...the DJ has closed down 364 points. Incredibly, and in something I have not seen in 30 years, according to the VRA System, investor complacency has actually risen over the last two weeks. Delusional...
A Flash crash looks very likely...as always, most investors will sell right at the bottom...many thousands of Dow points lower.
I've been listening/reading the "gurus" and have yet to hear a single one say "Don't Fight the Tape, Don't Fight The FED"...as it applies to where we are NOW. The FED is "raising" rates and the tape has turned "negative". Wake up guru's...this is a most important market fact...one that we won't ever forget here at the VRA.
Bottom line: if you are long this market, you are fighting the FED!
Rigging the VIX
The VIX Index (volatility) is STILL just 25?? In this market?? You know my thoughts...."somebody" wants to keep the VIX low so people don't freak out...which is exactly what happens in the investment world each time the VIX breaks 25. This is absolutely a market "tell". The question is, how long can they continue to use it to support stock prices. My guess...not much longer at all.
NEW BEAR MARKET TRADING MINDSET??
THINK ABOUT THIS; when we are short the market, we get concerned when the markets are heavily oversold...and for good reason...it could well be headed for a reversal and a move higher.
But think back to the 7 year bull market we just came out of. When "that" bull market was at 90-95% overbought, in MANY instances it would simply keep moving higher! That's the kind of strength that was behind the most recent bull market. Thanks QE!
So....stay with me here...why shouldn't the reverse be true as well?? In a brutal bear market, I believe we should get used to the markets continuing to go sharply lower, even as they are continually oversold, and in the 90-95% range. Let's not forget this interesting possibility folks...
The internals are once again pathetic...with a 3 day weekend coming up, we could easily see the sellers get "panicky".
Stay Frosty...make sure you are positioned to survive the recession (or worse) and bear market.
Kip
