Here we are, the third trading day after my previous market update:
Friday posted an intra-day reversal to the upside, after setting a new low for the move. The reversal came on the highest volume since the prior intermediate-term lows. But, the VIX did not spike as high. Does it mean we need more fear before we get a tradable bear market rally?
As show on the charts above…
…now the VIX has spiked high enough. What we’ve got now is day #1 of what may indeed be a “real” rally (as opposed to a failed rally attempt). The confirmation, if/when it occurs, will be a follow-through day, traditionally around the 4th to 10th day of the rally attempt.
Note: The rally attempt actually started during the day on Tuesday, when a new low was made during the session and then the market reversed and closed strong on the highest volume since the previous tradable lows. However, even though the volume was the highest since the previous lows, it was lower than both of them. Part of that is the normal seasonality (lower volume) that comes with summer vacations.
PS: The long position I put on a few days ago is (currently) sitting pretty. It was highly leveraged, too. I went long out-of-the-money call options, without an offsetting short call option to neutralize the time value decay. This is the most levered option position you can take. I only do it on rare occasions and in small quantities. Also only when I see the possibility for a large and rapid move. So far so good, but nothing matters until a position is closed. No counting chickens until they are hatched, especially with volatile positions like this one.