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Market Fragility Returns

|Includes: QID-OLD, QLD, QQQ, SDS, SPDR S&P 500 Trust ETF (SPY), SSO, VXX, WEAT, XIV

I have been harping all year that signs of a major top abound, and the scene continues to unfold. I have no conviction at the moment as to whether we bounce a little here or continue lower. In the big picture, I remain exceedingly confident that we are witnessing a major topping process. In the short term, I could imagine us bouncing here. I am net short, but have covered my VXX positions and bought a little XIV (inverse VIX) as a hedge of sorts. Today, even with the market very red, VIX underperformed significantly. It may be that fear is overblown for the moment.

Here is a long term look at the S&P (NYSEARCA:SPY). For those of you who have been following along on my blog, you've been seeing this rising wedge since early 2013. We had a significant violation of support in October. I suspect that softened the ground and we will see another significant breach by the end of January, if not much sooner.

Here is a short term look at the S&P (futures). We see that the support line was violated once again and the 50 day moving average was also violated in the last week.

The Nasdaq (NASDAQ:QQQ) has markedly outperformed for years. It has hit has an intermediate support line and pulling back from resistance. If the air starts to come out of this equity bubble, I expect Nasdaq would significantly underperform as traders sell winning positions in tech to cover losses in energy and high yield.

Here is VIX. It is at levels that have often proved to be tops for fear. VIX also put a sizable wick onto the chart today.

One commodity that I have been long (options) for awhile appears to finally be breaking out: wheat (NYSEARCA:WEAT). It is approaching the 200 day moving average, which should act as resistance, but it has been beaten down for so long that would seem to have plenty of room to run if it gets some momentum.

Good luck trading in these volatile markets!

Disclosure: The author is long XIV, QID.

Additional disclosure: Long WEAT calls.