I’m currently in a waiting mode, and believe the gaps will soon be filled. Commercial hedgers are pessimistic as well, see arrow at the bottom.

Plus, if you agree with the “Sell in May, go away” theory, there’s only 4 weeks left before the party is over for the summer.

20130326-spx-futures

This isn’t technically correct, but a possibility. The most positive spin I could put on this chart.

Level to watch is around 1525.

fut_chart.ashx

I’m not a perma-bear but I AM short the SPY at the moment.

With every confirmation of my position I wonder if I’m biased. I’m staying short, for these 2 simple reasons:

  • There are now 2 gaps on SPY, one from Jan 2nd 142.56 to 144.73 and one from this morning. Gaps are always closed. On the individual stocks they sometimes stay open for a long time, but not on an index ETF.
  • I see a rising wedge. There’s a dozen other lines I could draw, but overall this pattern ‘speaks’ to me as the right one. Volume and stochastics confirm it.

20130305-spy

Here’s a 22 year chart of the VIX Volatility Index. I used VIX yesterday to make a decision about a short trade, but I have reasonable expectations (hence, Dec 2014 puts and not anything more dangerous, ha).

Yes, there are sharp spikes, but longer term, it bottoms out in rounded vallies.
Below is a chart of S&P 500 Index for the same period.

Overlay of the two charts: