Wednesday, July 20, 2011

Let it ride

Yesterday I called for a higher close today and boy we sure got it, to the tune of a monster 202 point jump in the Dow.  The technicals all worked to perfection, Colin Twiggs' money flow hit a bull's eye, J-Trader's Buy/Sell model buy call was spot on, and my XIV trade panned out nicely with a 5.4% gain today.

And I don't think it's over yet.  Even after today's big gain, the indicators are still only just coming off oversold levels.  We're now well above both the Dow daily pivot at 12,386 and the ES daily pivot which for Wednesday is 1315.25.  Today ES ended outside its July 8th descending regression trend channel and that's a bullish setup.  With another 0.15% gain right now at 1:45 AM EDT, that will be a bullish trigger unless we fall below 1308, something that's not looking too likely right now.

And the VIX dove 8.3% today with a gap-down red candle, completing a bearish shooting star.  That is a powerful reversal pattern.  I think the VIX still has lower to go on Wednesday.  It's just now coming off highly overbought levels and it has no meaningful support until its 200 day MA at 18.44.  Today's drop also brings the VIX out of its ascending RTC which is a bearish trigger.  Lower VIX, higher stocks.  I intend to let my XIV trade (which profits from a drop in the VIX) ride tomorrow.

Finally, I note that J-Trader "expects more upside" on Wednesday and I completely agree.  His system has been working amazingly well in a choppy environment.   So tonight I'm seeing lots of reasons to hold 'em and no reasons to fold 'em.  That's all she wrote.

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