21 December 2009

SP 500 Futures Daily Chart

The VIX (volatility index) fell to 20.39 today which is near the lows for the year, signaling a complacency in the US equity markets, although the bulls would call it 'the new norm' which is a euphemism for 'all is well again.'

Today the market drifted upwards in light volumes as the risk trade was sold (treasuries, precious metals) although stocks struggled to hold their early gains, and remained in the big rangebound trade from early November.

This is a holiday shortened week, subject to portfolio adjustments and some profit taking, which causes cross currents, but often with an upward bias as the tape gets painted into the year end and the Other People's Money crowd take their bonuses.

We are playing these markets now by holding lightly hedged longs (about 1/6 position) in the metals and miners which we picked up around 1120 gold on average, after the 'sell signal' which we issued here at 1215.

Now we stand pat on all investments and wait for something to break out one way or the other. The dollar is reaching the technical levels we are looking for on a bounce, and now we will see what it is made of.

Markets are being shoved around by the big traders. Do not overtrade in response.