Thursday, February 9, 2012

BUY TVIX @ $14.79

Towards the end of yesterday's session I took the plunge and loaded up on VelocityShares 2X VIX ETN (TVIX) @ $14.79. As the following daily chart shows, there is a smidge of a True Strength Index (TSI) indicator trend line break BUY signal as well as a strongly favorable positive divergence BUY signal in place. On reflection last evening I am fairly confident I took this position too soon and I will show you why on the third chart below - the US Dollar Index (DX).

I will also add that the TSI is reading -0.56 and that is much less than ideal. A far more promising setup would have the TSI much closer to the ZERO crossover - say at -0.20 or higher.

One of the details I forgot to include on the chart of TVIX (above) is the daily volume, which I take as providing a bullish clue. I made the following chart to show my thinking on this issue of volume.

The 'fly in the ointment' for me is the probable behavior of the US Dollar Index (DX) in the next few days. The previous intermediate cycle conclusion in late October seems to have provided a cookie cutter pattern for our current situation. That pattern includes a sharp drop, multi- day consolidation, a single day sharp drop, 3 days sideways, then a final terrorizing drop. We appear to fit this pattern to a tee at the moment and today is day 2 of the final 3 days sideways before the concluding terrorizing drop (i.e. next Monday).

You know, I wish it were this simple to figure these things out and believe one knows the future, but we all know that is impossible. I certainly do not have a crystal ball and anything, beginning the next 5 minutes from now, is possible. But these are my thoughts and I'm going to play whatever odds I surmise are in my favor (lol). Wish us all good luck.

My TSI Trading record has been updated.


  1. Many Thanks John!
    I Love Lady VIX & Lady TSI!
    VIX has now closed well below 20. When the VIX is below 20, the strategy is bullish. For investors who expect the equity market to move sideways or up in the near term, XIV is an interesting investment opportunity. The potential risk is, when catastrophe hit the market, long XIV investors have to pay. In this sense, buying XIV is similar to selling insurance policies.
    Success to you...

  2. Nice action on LSG and TVIX today. Great calls John!

  3. Hello John,

    I ran the numbers today using TSI at 4,7 like you taught me and sure enough, you got your wish - that baby is sitting at -0.20 heading straight up like a rocket on the daily chart with a very clear trend break. The only thing I wanted to ask about is your opinion on targets: from what I understand the normal range of the VIX is 20-30 (complacency-to-fear). If we go 2X since the TVIX is 2X leveraged, I would think setting a stop at around 60 would be smart. Of course it looks like TVIX can hit 100+ when it wants to, so how would you maximize profits while minimizing risk? Thanks kindly for your superb blog,

  4. If you are anticipating intermediate bottom in USD in a few days, wouldn't that benefit gold?
    So why not hold onto our gold stocks at least till Monday?

  5. Steve - I guess I don't think about the upper price too much, for starters. The 50 dma is at around $29 and the 200 dma
    is around $38. Those would be a couple of obvious resistance levels. Honestly, I will hold on as long as I am comfortable
    with the idea that the S&P is going to fall further and the dollar rise. Once either of those two concerns are iffy in my
    mind I will sell.

    Sure, this could, I suppose, be an opportunity to make a very large gain very quickly. But it could also
    backfire. So rather than try to hold onto a specific selling price, come hell or high water, I prefer to just make some easy
    money - if there is such a thing - and let the next guy hold the hot potato. There are hundreds of stocks that go up every day.
    When I sell I never look back, but just look forward to finding the next promising setup.

  6. Anon - your thinking is correct....a further fall of the US Dollar would probably boost gold and miners.

    I have sold two of my three mining positions and the one left (USSID) took a nose dive at the close so I may just hold it for quite a while and be patient.

    The reason I sold my two mining stocks was first, I had a profit in each, and second, I wanted to keep a profit from each.

    If my trading style or concern was to see how many trades I could do so that I kept all the money on the table - scored the highest possible sales price (like waiting until Monday) - then I should not have already sold.

    My trading style is a bit different however. For me, what I do best is buy when the odds are in my favor and sell *before* the odds change on me.

    This works well for me and I make no claim that anyone else in the world should do as I do.

    There are zillions of ways to trade, I have tried my share of them and this style feels comfortable to me. I sell and then I move on.

  7. hi john
    how are you?I'm with you with TVIX trade, although i'm not in well as you.You've made a great call but i read it too late.So i bought today.Hope it has a long run left ... ;-)

  8. Danielle - I suspect the best part of this position will be realized weeks from now when
    the S&P goes into its concluding nose dive. In the mean time, the daily chart TSI has not
    even made a trend line break let alone a ZERO crossover into negative readings. I am preparing
    myself mentally to expect some more up and down nonsense in the mean time.