Saturday, February 3, 2018




DOW  Drops  1,000  Points


Do you have a plan in place if the major indexes correct in the next 2 weeks?  This may seem to be a hypothetical scenario but in actuality it is not.  In  2017  the market had corrected less than -3%  and a mild correction of  -3%  to  -5%  is quite normal in a bullish market.  When I analyze the charts of the   $DJI,   it appears that the index trades at the upper bollinger bands from 9 to 14  days before it begins to consolidate.  $DJI  is currently hovering for  10 days  at the upper bollinger bands and it could snap back to the mean.  Currently We have only 2  distribution days  between the  $SPY  and  the  $NADAQ.  There will have to be an elevated count of distribution days before panic begins to set in the market.

On Wednesday Jan 3rd, I had alerted my readers and followers to seek portfolio protection with the use of option trades on  $VIX.  Some of you followed up on it and now have profited handsomely.  $VIX  closed at  $9.15  that day and now after 3 weeks, it is up a whopping  +23%.  WOW!  WOW!  WOW!   This is highly unusual because  $DJI  is also  +5.47%  in the same period.  How often do you get an opportunity to profit in the index as well as the  $VIX ?


Above 2 paragraphs were the opening part of my blog post that was posted on Sunday January 21st



Above is an excerpt from my blog post published just 2 weeks ago when the  $DJI  was at 26,616.  On Friday Feb 2nd,  the  $DJI  was down by 1,096  points for the week.  We have not had more than  -3%  correction in the last several months.  The trend is till bullish but even in a bullish trend, one can expect the market to correct  -3%  to -5%.  Last week it corrected almost  -4%.  

$VIX  was at  $9.15  2 weeks ago when I wrote this post and on Friday Feb 2nd, it spiked to  $17.3.  Thats a whopping  +89%  spike in the volatility  within 2 weeks.  I was suggesting using an option trade to protect the portfolio.  The indexes trading at the upper bollinger bands for 14 days have snapped back to the mean and that is exactly what happened last week.

I felt that my readers and followers should make a note of this post and prepare for what may unfold with the market on the day after the Super Ball festivities.  

Enjoy the festivities of the  Super Ball  party Sunday afternoon

Happy Trading!

Amin 

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