Your friendly neighborhood spiderman…
Spidey is hanging on to the Vulture’s leg as he flys up high, but Vulture shakes him off.
The Vulture: Say hello to the sidewalk for me, Spider-man!!
Spidey: You talk to sidewalks? You’re even crazier than you look! – Spiderman Comics
Monday morning, with the DJIA at about 11,450 or so at I’d written this:
“My spidey-senses are telling me that we’re experiencing some relative calm here before the next big storm. This market is either a coiled spring about to put on another 5-10% move higher…or it’s a ticking time bomb about to crash 5%. And I’m thinking we’ll see such a move in measured in days, not weeks. That is, this is a market that’s likely got a binary outcome ahead of it. Steadiness doesn’t look likely. Volatility is ahead. You can buy volatility by buying VIX calls or shorting VIX puts or you can buy both calls and puts on the broader markets and in your individual stocks in the hopes that the increased volatility will increase their value no matter which direction the next move goes.”
With its 3% drop early this morning, the DJIA has indeed now fallen just over 5%. Look at the five day chart:
The VIX that I’d highlighted for a trade on Monday has indeed spiked and with today’s pop it is now up 30%:
And I got more than a few of you subscribers writing me thank you notes for flagging that VIX trade and getting you guys less long before this most recent market crack. That said, I’m not a day trader and I didn’t make the hugely profitable VIX trade myself though as you guys know I did get out of Ciena and added a new short yesterday. BK is down and setting new 52-week highs as I type, but I wouldn’t be surprised to see it get some counter-trend bounces before working out for us. So I’ll let it pop before adding to the short. Ciena is down nearly 10% this morning on no news and I’m not looking back at that one for a while anyway.
LPS continues to collapse and our puts are up well over 200% now but I continue to want to make this one ever bigger. The newsflow, the fundamentals and the chart are all looking like this thing’s doomed.
If you missed the opportunity to put money to work on the long side now’s a time to start nibbling. I do think we’ll probably muddle here below 11,000 on the DJIA for a while and that we don’t have to rush it. As you guys know, I did some buying back the last time we were down here and then I did some selling after we’d popped. I’ll probably look to do some of that same set up during this meltdown, but I’ll give it some space between purchases. I’m looking at Cypress and Corning as my first nibbles, but haven’t done the trades yet. Back in a bit with details on exactly what common and/or options I’m using after I pull some triggers.
Let’s continue to try to avoid the sidewalks, eh?
