IT IS COMING THIS TIME

Here is a chart of the VIX and alot of other stuff on it. I won't apologize for this mess, anyone who is a trader is used to looking at things like this. The Green Line is the SP 500 and I have marked off with arrows where moves in the VIX beyond containment bands have triggered reversals in the SP 500. By and large this is a very good way to time the SP 500. It has bad signals just like anything else, and there have been a couple since the FED took over the stock market a few months ago. Deal with it. If you had an approach that never generated a loss you would not be reading this blog, and also you would not be living on this planet either.

The bands can be anything from standard deviation bands to bollinger bands, you name it. You can draw regression channels, just go hog wild on this. The bottom line is that when the Vix gets stretched as it is now, reversals take place. When it gets extremely stretched ( not quite yet ), big reversals take place. What I am hoping for is the PPT to continue to play their games through year end, keeping this strong. That should result in a bigger stretch away from a central point. Who knows that may not happen. This is so set for a decline, that maybe all their games will accomplish is keeping the market sideways. Either way we have to be looking for sell signals now.

I gave in and listened to one of the gloom and doom videos over the weekend, this one from a dude named Stansberry. I don't know him from Adam, I have no idea if he has ever hit a ball out of the infield in all honesty. I will say his presentation was very well put together and difficult to challenge on a point by point basis. The bottom line is that when excessive levels of debt are reached, companies fail. The corporation called the USA is in this position. It is difficult to accept the conclusions these gloom and doomers make, but hard to challenge the individual points that lead them to these conclusions. I think the collective psyche of Americans will change quickly if the stock market happens to hit a rough patch. The "recovery" is nothing other than a cute BS story painted by the media to support their savior Barry.

This situation is years in the making and it is Greenspan's fault, not the current president or Bush for that matter. Greenspan started this bubble rotation cycle that led us here. He is the one to blame. What anyone should do about any of this is of course an individual decision. If you buy into the Armageddon type of scenario then do something about it. I personally have done a few things like gather up several weeks of extra food that is not perishable, and also made some water arrangements. Other than that it is business as usual. I do believe we have a reckoning period coming sooner than later, and I really have no idea how bad it will really be. It is hard to envision wide spread rioting in the streets, but people are people, and we certainly have our share of entitlement folks in this country. I see no reason why these people won't react the same way their European counterparts are. I heard some gal on FOX the other night ( of course a teacher the biggest cooks we have in this country ) claiming the government owed us all a guaranteed job and health care. She could not have been more steadfast in that belief. I wish I could buy her college and fire her.

One thought I will leave this topic on is this. I do have other business interests, and I see the following theme starting to shine through. Their is a voice that is optimistic, yet on the other had budgets are being slashed. Obviously the later reflects the true view on business prospects. I will just leave it at that.

The media won't call out Greenspan since he is a democrat, so don't hold your breath on that one. When he refused to ever allow any short term pain, and orchestrated rotating over inflated asset class prices, he eliminated the natural reversion to the mean price movements that keep things in balance. As a result we wound up with several things all at extremes and basically nowhere to go. Now they are repeating this with stocks and GOLD. I am sure they would love to think they can rotate out of them into real estate, but that seems to be a unlikely save that can be made. Real Estate is not going to be able to be re-inflated without a better overall economy. They have setup two places for people to go and of course that is why GOLD and stocks have the 90% correlation they have. They are both being artificially inflated by the same people. It is also why they are both going to decline together.

Maybe when this starts GOLD will separate and make the GOLD bugs a ton of money, we will have to wait and see. They have been dead right about the direction, but dead wrong about the reasoning since the dollar has not really declined, it has gone sideways. However, for the moment, these two markets remain joined at the hip. In general, both Gold and the dollar tend to have seasonal moves at the beginning of the year, the Dollar up, Gold down. This also lines up with the short stocks scenario.

I would suggest studying the VIX, there are a million ways to use it and I think you will be able to find many ways that will help you in trading the stock market swings with it. I have thrown out a few in here over the last year, there are many others.