It was tempting to buy some of the medium sized companies that have sold off already way before the indices started to keel over, the likes of JKS, SPWR, CTRP, ELLI, MU, DATA, stuff like that. These are already deep in bear territory.
However, for now we stick to shorting VIX futures half a year out. VIX is mean reversing and it's difficult to imagine there won't be a period between now and July where calm returns to the markets for some period to get the VIX back under 20. If the worst comes to the worst, these future positions can be rolled over, although that's not likely to be free.
No green close today, we're likely to retest 1830 on the S&P, so we keep plenty of powder dry.
"It's intraday volatility for sure, but it's a good sign. Today felt as close to capitulation as you can get," said Hogan. "To have it reverse itself, it's very strong sign technically." The S&P 500 fell through the key 1,867 level for a third day, its 2015 low. But the technical damage accelerated when it slid below 1,820, its 2014 low. Traders have been watching that level, and technicians see it as a key support point that would give way to a drop into the 1,700s if broken.
Essentially, the selling stops when all the bears have been exhausted, sentiment completely craps out and there's simply nothing left to do but buy. It's called "capitulation." Market veteran Jeff Saut, the chief market strategist at Raymond James, said Wednesday's early-day 566-point Dow plunge felt like a possible capitulation point, and the major averages heading into the close were threatening their biggest intraday reversal since 2008. But how do you know for sure when capitulation is about to happen and it's time to jump back in the market? Here are 10 time-tested signals for when capitulation is in the air:
And their third sign is what we have been trying to trade by shorting VIX July futures :
3. The VIX. Traders use the CBOE Volatility Index as a fear gauge to see where options traders think the market is heading over the next 30 days. The VIX was trading above 30 during Wednesday's blowout, which of course is nowhere near the 80 it hit during the darkest days of the financial crisis, but in the neighborhood that would suggest a fear top. The index did reach an intraday high of 53 during the August 2015 lows, but quickly settled at 40 and took a rather sharp trip down in the weeks and months after.
Cramers list is pretty similar (of course, as there are only so many variables in play), but he does offer a useful perspective:
The market sentiment has become more negative than Jim Cramer can ever remember in recent years. That is why Cramer decided to dig a little deeper to figure out when the market will have a real investable bottom and not just an oversold rally. "Sentiment can't cause a rally on its own. Something fundamental has to change," the "Mad Money" host said. In order to answer the question of when the market will bottom, Cramer referred back to the checklist he created on Jan. 11 of what needs to happen before a genuine bottom can occur. Unfortunately when Cramer reviewed the checklist, not many boxes were checked off — even after the insane torture that stocks have been through so far this month. After Cramer went down the list, he understood exactly why the bottom has been so hard to find.
01-21-2016, 12:50 PM (This post was last modified: 01-21-2016, 12:51 PM by admin.)
We're also looking at this:
Amazon really is a terrific company, more especially for its web services:
Chamath Palihapitiya is a famous startup investor who runs his own venture-capital firm, Social Capital.. But if he had to put his entire capital in a single company and hold it for the next 10 years, Palihapitiya knows where his money's going: Amazon. "I think Amazon is the most interesting company right now and represents the surest path to a $5 trillion (15-20x from current levels) market cap within 50 years," Palihapitiya wrote in a Quora Q&A session held this week... AWS is a tax on the compute economy. So whether you care about mobile apps, consumer apps, IoT, SaaS etc etc, more companies than not will be using AWS versus building their own infrastructure. If you believe that over time the software industry is a multi, deca-trillion industry, then ask yourself how valuable a company would be who taxes the majority of that industry.
We can't wait 50 years but for the forseeable future, growth of the cloud is as good as assured, and with Amazon, the leading cloud provider, at support levels (plm $570, the chart is self-updating) it looks pretty tempting.
And this, of course, is something we have been noting for quite some time:
Ellie Mae, Inc. (ELLI) rallied aggressively between mid-2014--when it traded near $25--and the $82.92 August 2015 high. Following the high the price pulled back, finding support just above $58. Between mid-November and January 19 the price has moved in a range between $66.56 and $58.25. Aggressive traders are buying between $59 and $58 with stop loss orders not far below. A more conventional entry point is to buy when the price breaks above the recent range--preferably a closing price above $66.56. Consider taking partial profits near the high of $82.92. Implement a trailing stop loss on the remainder of the position, and/or place an additional target at $86. A cautionary sign on this stock is the high P/E ratio, currently at 90. That doesn't rule another a rally, as the company could increase earnings and/or a stock can continue to move higher in spite of its high P/E, but it is a factor to consider before trading this technical setup.
ELLI was our first purchase, almost a month ago and the funny thing is, despite all the market mayham in the new year it is still in the green. So far, the support at just under $60 has been rather impressive.
We've really been pussyfooting as one cannot take anything for granted in these markets. Any small data deviation can very well trigger another big selloff, which is why we remain overwhelmingly in cash, for the moment. Nibbling only at shorting VIX futures half a year out as that stuff is mean reversing..
Recession talk has been circling the stock market during its rapid decline, but those concerns could be allayed over the next two weeks depending on whether U.S. data improve or corporate earnings perk up. Stocks bounced Thursday in a choppy session, as oil rebounded by more than 4 percent. For Friday, there are a few pieces of economic data — Markit manufacturing PMI at 9:45 a.m. ET and leading indicators and existing home sales, both at 10 a.m. More telling may be earnings reports from global industrial giant General Electric, railroad Kansas City Southern and software giant SAP. Synchrony Financial, Sotheby's, SunTrust, Rockwell Collins, Citizens Financial and Legg Mason also report. Oil could resume its decline Friday, after West Texas Intermediate futures settled higher at $29.53 per barrel Thursday.
