Watch the VIX

Indicates More Selling Pressure Ahead

By Bryan Bottarelli
Wednesday, December 03, 2008 9:54 AM EST
Wed, 3 Dec 2008 14:54:00 GMT

Dear Bottarelli Research Member,

I’d like to begin today by looking at the CBOE Volatility Index (VIX). As you know, today’s market is driven entirely by emotion, and the VIX is the one and only index that translates these emotions into chart patterns. As you can see below, the VIX is currently bouncing right off its 50-day moving average. This tells me that we could see another move up to the $80.00 level, which means we have more downside action ahead.

VIX

As a result, let’s continue to maintain our active downside positions, which are the DXD December 80 Calls (DZS LB) and the put-side of the QLD December 22 Straddle. Both plays are currently at break-even, but they’ll certainly hand us a profit on any forthcoming market downside action.

At the same time, let’s also hold our DE January 30 Calls (DE AF), which are trading at break-even as well. Should we get a sudden market pop (similar to yesterday), we’ll be in position to quickly profit off this move using these calls. Maintain this position as well.

DE

In terms of new trades, I’ll most likely come out later in the session with some additional plays. But until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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