VIX Concerns and Accumulation/Distribution Correlations

[Billy]

FWIW, please find hereafter a few of the comments I made replying to some members’ questions by email this weekend:

What concerns me the most currently is the VIX apathy during the decline. The VIX spikes during panics usually reflect ST aggressive hedging by big institutions who prefer to hold most of their long positions with an insurance instead of actually selling their huge positions. The nasty decline of prices on heavy volume without any true VIX spikes do suggest to me that the big sharks are really unloading massively their long positions like they haven’t done during all prior corrections since 2009. The TEV on inverse ETF’s also lacked any spike contrary to the usual correction norm. Large players perhaps simply don’t need to hedge aggressively anymore because they already sit on a lot of cash. All my correlations studies of the indices with the Acc/Distr ratings are also pointing to an obvious overdue bounce which COULD hit up to the 20 SMA’s. But that will probably be just another short-covering reaction to Friday’s OPEX technical levels/targets without any meaningful follow-through.



This last correction points to a change in character of institutional behavior that was not present in all prior corrections. For whatever reason, they are clearly in a fresh selling mood and betting on much lower prices to come so I doubt that they will accumulate aggressively at current levels. In case of a Thanksgiving bounce, I’d be very careful from the post-THX Monday onward and ready to short aggressively in case of renewed high-volume declines. The best now is to trade small options positions day by day and consider the indices’ 9EMA’s and 20 SMA’s as the most likely spots where the trends could reverse if we see volume spikes near those dynamic resistance levels. For GDX, the 9 EMA is particularly important after reviewing prior corrections.
Billy