Morning Audibles 3.19.10 - How to Survive a RIPTIDE

I got to the party late last evening, (actually, didn't get to it until this morning). Nevertheless, I did enjoy reading all the "back and forth", and my metaphorical 'takeaway' was that it reflected exactly the position that traders find themselves in at the moment. The topics ranged from NCAA brackets (and bracket entries being "torn in half" with the quick exits from Georgetown, Marquette, & ND (Big East ain't representin' so well), to divorce letters, to rip tides. This was all in the backdrop of the eve of an OPEX Friday which happens to be a quadruple witching. Equities seem technically overbought, yet the DOW broke to new highs this week, suggesting 'bullish' technicals. Is the Fed 'accommodating' (with low rates for an extended period of time), or are they ending some programs at the end of the month? Is Greece bailed out or not? If so, by whom?

It's safe to say that none of those questions that anyone had on their minds when they went to sleep last night were answered this morning when they woke up. So the best CV can do (when faced with the question of where we're going, is to simply understand where we are).


I'm going to start with some basic FIBO levels from this weeks high on the SPX of 1169.84.


.008 = 1160.48
.013 = 1154.63
.021 = 1145.27


Those are pullback levels that could give it a little 'technical breather' from being overbought, but NOT dissuade and new bulls that might have come on board the past month, or so. Yesterday, SPX flirted with 1160-1161, but never touched it. Futures are down a little this morning and it's possible we'll be visiting that first number. It might be a good idea to watch the first 5 one minute candles to see how it behaves. Overall, however, today may be duller than most people expect (for an OPEX day). It seems like many INDIVIDUAL stocks are already "pinned" to their proper integers. One "head scratcher" for CV remains the fact that, the MAX PAIN for EOQ SPY was 106 the last time I checked. From where we are now, that would take many by surprise. It begs the question. How much of the move this past week was portfolio rebalancing for the end of the quarter, and how much remains to be done.


Another thing that caught CV's attention were, what seem to be "absurdly low" readings in the VIX (by contrast to the fundamental economic & geopolitical climate). So I took a look at the WEEKLY VIX going back a few years.

What stands out like a sore thumb is the fact that the VIX 16 level was only hit TWICE since the crisis began (and both times it served as a springboard for higher volatility, and lower equities going forward. The first 16 was during the October '07 highs (It had been elevated since the summer when the Fed "knew nothing - per Cramer", and decided to warm up the helicopter). Then, in May '08, it settled there at the PEAK of the May '08 rally (after, it was thought, that they had successfully 'contained' any financial meltdown to Bear Stearns). We're just about at 16 again, so stay tuned.


I'm not making any short to mid term bull or bear calls. Remember, the beginning of the week, Andy T put up a chart which showed a possible case for equities reaching the 1235 level (not an endorsement, just a scenario). I suppose on the downside, one can't completely dismiss that 106 MAX PAIN number on the SPY (Think of it this way - the January move from 1150 to 1044 was a .09 move - If you apply the same to 1169.84, that puts you down around 1064 - near the MAX PAIN for SPY). After today, there are still 8 trading days before the end of the month. Maybe some of those "minor fibos" I presented earlier could provide the map for baby steps. The "Greece Fire" still hasn't been put out. Peolsi is out there challenging the constitution trying to get HC passed. So it's hard to say what kind of RIP TIDE we're in.
In any case, here's how to survive a REAL one.

Or, the CNBC version. Just keep buying stocks.

Or, the Warren Buffett version. ("When the tide goes out")...

The other metaphor is "torn" (and I had to find a way to get a picture of Natalie Imbruglia on the screen, and otherwise set you up for music offerings later in the day - good luck!)