On Tuesday afternoon, we closed our short S&P 500 futures position after hours, on the expectation that some sort of bounce was developing in the near term. If that's what you call a bounce, it was pretty pathetic!
What a lame-ass bounce! (Source: Yahoo Finance)
We'll see what type of follow through we get Thursday and Friday. That MAY not be it for this bounce - countertrend moves have a tendency to move in an A-B-C type of pattern, rather than a straight line. So it's possible that today's drawback was the "B", or pullback, part of this retracement. Which would infer that when completed, we'll see another leg up - constituting the final "C" portion of the pattern.
How's the VIX looking? I'm glad you asked:
The VIX is alive and well. Fear is back! (Source: Yahoo Finance)
It's still a "bull market in fear". A breakout in the VIX to the upside would likely coincide with a breakdown in the S&P to the downside. So we'll watch both indices closely. If-- and when-- we get a dual confirmation, that would indicate that the bear is back in charge!
PS: If you're thinking about taking advantage of this pullback to go "long the VIX", you'll want to check out the ETF VXX.
PPS: And the ETF SDS is the double short tracking fund for the S&P 500 - remember if you are LONG SDS, then you are DOUBLE SHORT the S&P.
Just in case you were sleeping too soundly at night, a double short ETF can be the equivalent of slamming a few cups of coffee before you go to bed.
Disclosure: Long SDS