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July 11, 2017 | Is Volatility About to Blast Off?

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

I wrote here yesterday about using VIX/VXX as a timing device to predict the end of the bull market. Below is a companionable view posted by ‘Seneca” in response. We both see “something big,” probably sooner rather than later. But we differ as to whether VXX, an ETF that tracks short-term S&P volatility, has already begun an ominous ascent. I expect it to go at least somewhat lower, to either of two precise targets given below in my VXX tout, before bottoming in record-low territory. If so,that would be imply a continuation of the bull market, at least for a while, by way of ratcheting rallies or steady drift. Seneca’s technical interpretation would suggest that VXX may already have gotten off the launching pad. Here’s what he wrote:

“The breakout in VIX in early to mid-April saw nine consecutive closing days over its 200 DMA. This was a signal toward value levels that are now benchmarks to observe [going forward]. The recent, slightly higher highs are ‘overshoots’ to the larger degree in market timing. VIX is not really about volatility as many see it, but more about [traders anticipating] little or no volatility’. This is being confirmed as VIX climbs higher along with equity prices, even though the increases have been small. VIX has been on a death march, but [change is augured by the fact that] it has closed over its 50 DMA for the last seven trading days; at the same time, equity values are perceived as being at a comfortable level. In reality, nothing could be further from the truth.”

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July 11th, 2017

Posted In: Rick's Picks

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