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Tuesday, January 9, 2018

XIV - Reversion to the Mean

Mean reversion is the theory suggesting that prices and returns eventually move back toward the mean or average.

XIV has overheated and a reversion to the mean is likely in the months ahead. 

When prices become this stretched from the normal, the move tends to be quite violent with a panic decline.

2day Chart
















This model shows similarity to XIV.  Notice the sudden drop with no warning, and continuation lower:
















Not much room for downside on this chart for UVXY.  Price slowly grinding along support with time.  Spike up likely within a few weeks.

2day Chart















35 comments:

  1. Largest point decline for XIV since 2015 likely to begin shortly in my opinion. Within a few weeks...

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    Replies
    1. Thank you SC! It seems like according to your XIV chart...maybe a little more to go say 2770s SPX and then rollover soon...

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    2. Yes, one more pop for XIV would be ideal. Very stretched. It is nearly mature according to the model.

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    3. Congratulations bears! The numbers are confirming the overextended market condition with extreme sentiment readings.

      "The difference between market optimism and pessimism on the Investors Intelligence survey is at a level last seen in April 1986, 18 months before Black Monday. Bullishness is at 64.4 percent while bearishness is down to 13.5 percent."

      https://www.cnbc.com/2018/01/10/market-optimism-reaches-potential-danger-sign-not-seen-since-1986.html

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    4. The market went up 50% from April 1986 to September 1987, before the October crash. If UVXY had been around back then it would be down at least 90 - 95% during that period.

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    5. In 1986 the dow went flat. Consolidation year, and then declined 10% during the middle of the year. 1987 surged up early in the year and then the October crash.

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    6. http://www.61point8.com/Portals/0/article%20images/20180111/20180111COMPQ1.png

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  2. R2K got its 10 Jan Bradley Date low right on schedule...Coincidence? Hmmmm.... As for UVXY... well, if you own it, Be Careful!

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  3. Now, any winter shock drop will not go below S&P 2637 (just below 50 day, bottom bollinger band, gap).

    RUT 1590-1610 now? Fake breakout? I don't know.
    FTSE fake breakout? I don't know.

    UVXY now has steel ceiling at 50 day, 12.50 - 12.68 (it gets there only on horrific S&P drop).

    Don't f--k around in this batsh-t crazy market, please.

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    Replies
    1. i dont know about you but you dont think we could drop 2800 to 2700 in one day ive seen it before

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  4. No one does that VooDoo as well as You Do, Dr. Bradley!
    MASSIVE R2K move off yesterday's low! For the skeptics...keep an eye on 17 Jan...and Be Careful with uvxy until then...

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    Replies
    1. January 17th! Nice. Right before the government shutdown on January 19th!!

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  5. Bitcoin is crashing. It'll drag the market down with it.

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    Replies
    1. SPX/XIV must be getting close SC...

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  6. Stock market is in beast mode hopefully we will see some volatility probably won't happen till we hit 2800 on the S&P

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  7. Upcoming Bradley Dates: 17 Jan and 29 Jan...depending on the cycle math used...so could 17 Jan be a potential HIGH and 29 Jan a potential LOW?

    Upcoming World Events: US Government Shutdown decision, 19 Jan; DAVOS, 23-26 Jan; State of Union, 30 Jan; FOMC meeting, 29-30 Jan.

    Coincidence? Hmmmm....

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  8. No idea how your trading this with the analysis posted

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  9. The U.S. stock market is unstoppable. When is this nonsense going to end?

    The Shiller PE Ratio as of last Friday (Jan 12th) is 33.80. Extremely overbought. Stocks have never been this expensive with the sole exception of the tech bubble in early 2000 when the Shiller PE ratio hit 44.

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  10. Based on the upcoming traditionally bullish events, it's also possible that the 29 Jan Bradley Date is...(insert drum roll here)...also a HIGH...after some potential churn in between now and then of course. Always in motion the future is, so...Be Careful!

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  11. XIV has two distinct drives. In December the first drive was three weeks. The second drive formed in January two weeks.

    It is getting weaker and if it makes a final third drive that would be ideal for three drives to a high. Common reversal pattern. Last week of January does look to be likely timing.

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    Replies
    1. Notice the three drives to a high in the model...

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  12. Of course more importantly all three drives are wiped out on the initial decline. Then the massive drop occurs in the model.

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  13. SC, do you have a target high for this pop in UVXY before the third dive?

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    Replies
    1. It shouldn't see over $10 if the third drive is in play. $10 is line in the sand. Vix is trying to breakout but there have been numerous false breakouts. The real one will come soon...

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  14. 9.72 Out and break even. Phew, sideline to take a look. Leave a small position for lotto. It is still the bull market even the daily reversal seems powerful, but could be wave 4 and one more leg go after the gov shut down is dodged

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  15. Bitcoin has dropped to $10,000. $5,000 looks possible next.

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  16. My short vol system exited to cash early in the trading day, after being short vol since early December.

    I am in cash until it signals reentry.

    The system is in no way predictive, it could signal as early as tomorrow afternoon or it could be days or weeks away.

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  17. Do you have a target for the down side of UVXY?
    (Thanks for the great blog!)

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    Replies
    1. A little lower might be possible with uvxy but shorting this would be pure Insanity in my opinion

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    2. Sure enough $10 was the line in the sand for UVXY. Failed at the resistance this morning.

      The third drive is in play. However, the downside may be little. Likely we'll see low $8's by the end of this week anyway.

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  18. No one can do that VooDoo better than Dr Bradley do!
    17 Jan HIGH...Coincidence? Hmmmm...
    Now the real question to ponder...is 29 Jan another HIGH or a LOW? Hmmmm....always in motion the future is...Be Careful!

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  19. My short vol system went from cash to short this afternoon,

    Not predictive, it could go back to cash tomorrow for all I know.

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