Dr. Kris'  Instablog

Dr. Kris
Send Message
Dr. Kris hails from the land o' lakes, beer, bratwurst, and Bucky Badger. She traded in her cheese hat for a propeller beanie and has never looked back. She has two degrees from MIT because one just wasn't enough. Her life goal was to figure out the universe and having done that (at least to her... More
My company:
Stock Market Cook Book
My blog:
Stock Market Cook Book
  • Is a market correction on the horizon? 0 comments
    Jan 25, 2011 1:12 PM | about stocks: VXX, VXZ

    Ben & Company is back in the boardroom to determine if they should start to worry about inflation. The Street seems pretty confident the Fed will leave interest rates alone but you can be sure that the decision notes will be examined with a fine-toothed comb

    We can't do anything about the Fed but we can do something to protect our portfolios. Any hint of negative wording could provide the catalyst for a market correction. From a technical standpoint, we're do for one any day now, anyway.

    Why? Because the daily chart of the S&P 500 (SPX) has been trading above its 40 day simple moving average (dma for short) for almost two months now. That's getting to be a long time. I did a cursory check of the chart from 2000 to present and found that out of the 33 times the SPX has traded to the upside for periods lasting a month or more, the index returned to its 40dma seventeen (17) times after a month, nine times (9) between one and two months, four (4) times after three months, and just one time for a period longer than three months which was a record five months hit in 2006.

    Currently, the SPX has been trading above its 40dma for almost two months. Sure, we could go on like this for another month or possibly longer, but the odds are sharply against it. So, what's an investor to do? Well, you could protect your long position with puts on the SPY (the S&P500 tracking stock), or you could play the volatility (which is negatively correlated to the broad market) by buying a call on the VXX, the short-term volatility ETN, or the VXZ, the medium-term volatility ETN. If you'll be hedging for more than a week, I'd recommend the VXZ to avoid the contango problem and use March options.





    Stocks: VXX, VXZ
Back To Dr. Kris' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


  • Bah humbug! The deluge of holiday catalogs has begun. In the face of no must-have technology, I'm predicting a weak retail season.
    about 16 hours ago
  • Java jolt: Coffee etn $JO (+4.5%) jumping above resistance to a new yearly high on nearly 2x volume.
    about 19 hours ago
  • Getting all googly: $GOOGL & $GOOG closing @ all-time highs. Stock +82% since rec'd to subscribers on 5/16/13.
    Oct 18, 2016
More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.