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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















163 comments:

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

    ReplyDelete
    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.

    ReplyDelete
  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.

      Delete
  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. Jan 29 is bottom for Vix so it will be the bottom for uvxy according to my understanding.

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

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

    ReplyDelete
  21. Replies
    1. Its a trend following system for inverse vol of my own design, nothing special.
      It's main attribute is that it doesn't give me free will. It gives a signal I do what it says, like a robot.

      This works for me, saves me thinking and reacting in emotional ways. I don't have any emotional investment in the trades, no wanting to be right, no averaging into losing positions in an effort to be right.

      I have never found an edge that I can build a system around that will trade UVXY profitably. I've tried. Sometimes I thought I had something but it always turned out to be recency bias and the edges I thought I had would not survive an extended back test.
      More power to those that can make money with it, I can't.

      Delete
  22. With today's super bullish close, and the upcoming traditionally bullish events...29 Jan is most definitely maybe looking like another possible Dr Bradley HIGH...potentially...or maybe not...either way, Be Careful with uvxy until then!

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  23. Will the Government shut down causes the sell down?

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  24. The model is looking perfect!!

    In the model there are still 3 bars left before the collapse. Each bar is taking 1 week. That puts timing in the first week of February.

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    Replies
    1. Timing for the sudden drop? Thanks SC.

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    2. Top and drop due in the model first week of February.

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  25. I am confused. Is the model one of the charts on this page? They claim to use shorter time periods, not weekly bars?

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  26. The model is the white chart on this page. Comparing XIV weekly bars (not shown) with this model the bars are identical and number of bars is matching up also.

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  27. The majik pixie dust of Dr. Bradley's Dates just keeps floating R2K and the broader market higher and higher...Coincidence? Hmmmm...
    Well, if this Bradley VooDoo continues, the current course may get a little choppy, but 29 Jan is certainly looking more and more like a HIGH Tide with each passing wave (pretty DEEP, huh?).
    Or maybe not...just something to ponder in the coming days...but for now--Be Careful!

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  28. sc are you planning on buying more uvxy your thoughts

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  29. Yes I am already positioned and will continue to increase to overweight. XIV is looking incredibly weak. SPX did make the higher high but XIV has been too weak.

    Vix is flirting with a breakout. So close...

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    Replies
    1. SC do you think the breakdown XIV may happen in January instead?

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    2. XIV is sideways but looks terrible overall with the weekly threatening to roll over into a sell.

      $60's will be tested.

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    3. 60s? Are you modifying the current expectations on the charts above? So far we're only looking for 95-115...Thanks again as always SC...

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    4. It's best to show the moves one step at a time. The chart above shows an initial shallow decline to start with. After that initial drop a bounce and down into the $60's.

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  30. Breakdown in SPX/SVXY correlation here... Inverse vol staying stead https://imgur.com/a/bqW9Q

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  31. whats the time frame in your opinopn on 95

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  32. February is likely to be one of the worst months of the year.

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  33. In 2 days XIV has lost 6 weeks of gains...

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    Replies
    1. Well's what interesting about that is SPX is still up 175 points from 6 weeks ago...my question is even when XIV drops to 115 and erases months of gains, will the SPX only be down 100 points from here?

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    2. Yes, excellent point. XIV appears to be leading down which is normal before a large decline.

      Supports for SPX at 2,725 then 2,580. Later in the year 2,300.

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    3. Thanks SC. That seems to line up well with XIV 115 and 95...Let's see how long it takes for the initial decline...Could be starting now if UVXY can hold over 10...

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  34. UVXY breaking out above the line in the sand at $10!

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    Replies
    1. you did say last week of January looks to be likely timing...let's go SC!

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    2. We might still see chop or sideways but XIV is definitely in trouble.

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    3. I do wonder if XIV will bounce one last time for your third drive...If so has to do it soon...

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    4. SC do you have any targets for SPX if we get that third drive higher in XIV to 150-155?

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    5. If there is a third drive it'll be only minor. XIV has lost it's momentum. Sideways until it goes off the cliff.

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    6. Seems like third drive in play on XIV...maybe 2865-90 on SPX before the plunge...SC do you have any upside targets on gold before it begins it's long descent?

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    7. Gold should make a higher high from 2016 before it collapses. 1400's.

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  35. Replies
    1. Nothings a guarantee but death and taxes

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  36. Some points to ponder...
    All models are wrong, some are useful. No one rings a bell at the top. Always in motion the future is...but if 29 Jan does produce a high, then...Be Careful!

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  37. 2795-2807 will end all nonsense.

    11 - 11.52 ceiling UVX-whiiiiiiiiiii....

    Whipsaws 9.25-12.68 follow

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  38. Uvxy looks like it wants a break out it wouldn't surprise me to see this thing above $12 in the next 2 weeks

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  39. sitting on a huge block of uvxy and a big short on xiv

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  40. Stopped out of my short vol position at a loss.

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  41. Massive selloff coming. Yes, it may be choppy and shallow to start with, but it will plunge deeper and deeper. Bottomless...

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    Replies
    1. sc whats your time frame 2 weeks a month your opinion
      not gonna holda ya to it

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    2. This is very odd behavior SC...SPX going straight up and XIV/VXX/UVXY are going the other way..and don't buy this rally at all

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    3. "The market can remain irrational longer than you can remain solvent."

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    4. We'll see a drop in February and much deeper in the months to follow.

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  42. SC, are you expecting sell off in first two weeks of FEb, and rally to April

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    Replies
    1. Down for months next. There will be some bounces on the way down.

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  43. "Bottomless" -- wow, now THAT's DEEP!
    29 Jan High? Coincidence? Hmmmm...

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  44. Congratulations again 'Be Careful', you're the only contributor on this blog that has consistently made excellent calls. I wish you would contribute more or ideally start a blog of your own. Many of us would eagerly follow you!

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  45. SC, do you notice this decoupling of SVXY and SPX? https://imgur.com/a/EIeoK

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  46. https://www.zerohedge.com/news/2018-01-26/one-bofas-imminent-market-crash-indicators-was-just-triggered

    Within 3 months...

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  47. I don’t care how high the Spx goes what I care is volatility. Imagine spx increased by 175 points, but UVXY is solid. What will happen if spx reverses course uvxy will fly. Check the volume in uvxy lately that tells you what is coming.

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  48. Notable pullback on 29 Jan...Coincidence? Hmmmm....

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  49. SC is this the drop or do you think we are still waiting until next week?

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  50. SC - ^VIX close at 13.85 break out from down trend ?

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  51. futures sinking overnight...this must be the sudden drop SC!

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  52. Recognia software has detected a double bottom chart pattern on proshares trust uvxy This bullish signal signal indicates tthat the price may rise from yesterdays close to the range of 11.50 to 11.80 this pattern formed over 19 days which is roughly the period of timein which the target price may be achieved. uvxy has a current support of 10.23 and a resistance level of 12.04 expected price move 15.4 percent according to recognia

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  53. Yes, this is the sudden drop with no warning as shown in the model.

    Support for XIV is $110 to $115 for this first leg down.

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  54. Bradley Date VooDoo -- alive and well -- Be Careful!

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  55. Great call Louis! $12's today!!

    Louis LombardiJanuary 25, 2018 at 7:39 AM

    "Uvxy looks like it wants a break out it wouldn't surprise me to see this thing above $12 in the next 2 weeks"

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  56. The estimate for the first leg up for UVXY is $14 give or take.

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    Replies
    1. are you selling in the 14s or your gonna wait until
      the next leg

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    2. Ideally should see $14, $10, then $20 for UVXY.

      Could exit at $14. Or just add more at $10 and hold for $20.

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    3. i have a massive position im gonna cover short on xiv when it hits bottom sitting on 5000 xiv short and a hugbe position onuvxy i will probally sell half at 14

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  57. The warnings were clear!

    SCJanuary 24, 2018 at 10:27 AM

    "We might still see chop or sideways but XIV is definitely in trouble."

    SCJanuary 24, 2018 at 10:13 AM

    "UVXY breaking out above the line in the sand at $10!"

    SCJanuary 25, 2018 at 10:51 AM

    "If there is a third drive it'll be only minor. XIV has lost it's momentum. Sideways until it goes off the cliff."

    SCJanuary 26, 2018 at 8:03 AM

    "Massive selloff coming. Yes, it may be choppy and shallow to start with, but it will plunge deeper and deeper. Bottomless..."

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  58. We're still just working on the first red candle in the model haha! Massive downside ahead!!!

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  59. thats probally the bottom in the market might seee a little lowewr then a pop up after trumps speach

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  60. Beautiful. Wait. Let's see some panic!

    "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."

    ReplyDelete
    Replies
    1. SC,

      Reversion to which mean? XIV $95 or are we talking more like long term support at $30?

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    2. $80 at the lowest for this move. $95 is probably conservative.

      The move to $30 is later in the model. Not important now.

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    3. your expecting 95 in this week or in this month

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    4. $105 XIV early February. Bounce to XIV $130 and down to $80.

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  61. Largest point decline ever for XIV underway!

    SCJanuary 9, 2018 at 2:11 PM

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

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  62. Thanks! Been patiently waiting with UVXY since Dec 28

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  63. Okay UVXY cooling off a little. The first candle of the model is complete. Still 2 more bars down to go. It'll be choppy and slower next as the decline continues.

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    Replies
    1. SC, how far up do you see XIV going on the bounce? thx
      Great calls by the way, this is getting exciting!

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    2. Thank you! XIV $105 to $130 and down to $80.

      This is going to be an exciting year!! Unprecedented moves in volatility...

      Delete
  64. SC - could this be the whole initial decline with UVXY heading back to 10 now?

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    Replies
    1. No, I don't think quite yet. XIV see close to $105.

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    2. ok cool, you think over the next two weeks it will slowly trickle down? Just wondering as massive hammer forming on XIV and inverted hammer on uvxy...typical of their sticksave action...

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    3. Yes, trickle down next, exactly.

      XIV fell below the 50dma so naturally it tries to recover with the daily hammer but this is about the weekly.

      Weekly is in a sell and the decline won't end until the weekly is oversold. The daily will just keep becoming extremely oversold.

      Delete
  65. I could be wrong. Someone claimed that 12.00 would be hard ceiling for UVXY, period? Right? So I think no one has crystal ball, so be humble or market will give you the lesson. I did not loss on this round but would win a lot if I stick. But I am not regret as I had discipline to stop loss. Again, UVXY can fortune or widow maker, so Be Careful

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  66. Measured move with the white box is at $25 for UVXY.

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    Replies
    1. Is that in line with XIV at 105?

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    2. No, the measured move is for the entire move. XIV would fall to $80 to reach that.

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    3. Vix is testing August highs.

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  67. Interesting... Tomorrow, super blue blood moon!

    "On Wednesday, much of the world will get to see not only a blue moon and a supermoon, but also a total lunar eclipse, all rolled into one. There hasn't been a triple lineup like this since 1982 and the next won't occur until 2037.

    "I'm calling it the Super Bowl of moons," lunar scientist Noah Petro said Monday from NASA's Goddard Space Flight Center in Greenbelt, Maryland.

    Others prefer "super blue blood moon.""

    ReplyDelete
    Replies
    1. trump doing his speech tomm market might pop

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  68. In the daily time frame, XIV could see a small bounce as both the indices and XIV are oversold, but should continue the decline in the coming weeks.

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  69. Dow plunges 400 points on track for biggest points drop since June 2016.

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    Replies
    1. If Dow plunges 3000 more points, which I agree with...won't XIV be lower than 80?

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    2. No because remember XIV has been leading down for a few weeks already and no significant gains since December. In contrast Dow and SPX gained a lot in January.

      So now SPX and Dow should accelerate down to catch up.

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    3. ok very interesting. I like it SC!

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    4. Dow and SPX especially on the second leg down accelerate down.

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    5. what month will second leg take place

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    6. march 7 my bday will be a great birthday present

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  70. So SPX say down to 2750 early feb, then bounce to 2850 and down to 2500s?

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  71. Once this first leg down completes there is a big bounce and SPX might retest it's January high. Dow might even squeak out a slight higher high before the washout second leg down.

    The markets are all slightly weaker or stronger respectively.

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    Replies
    1. Thank you SC, appreciate all of your guidance!!!

      Delete
  72. I'm glad vol has risen for you guys.

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  73. SC, when do you think this first leg down will complete?

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    Replies
    1. Probably next week. VIX golden cross is imminent.

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    2. Often the cross coincides with a short term change in direction. Maybe UVXY pulls back more or not. Any way you look at UVXY there is more upside.

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    3. a move above 283.30 would target 284.50 to 285.50
      a move below 281.22 would give us a signal for further downside

      Delete
  74. S&P 2798.03, hard bottom. After, VIX gets pushed to 12.8 or lower. UVXY 9.9 - 10.40

    Honestly, from here, a surprise collapse in the S&P would be ok with me -- but I highly doubt it (see NYMO chart, and bottoms).

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  75. Trump about to release that 4 page FISA memo...could be the catalyst for 105 XIV soon...oversold bounces taking place...

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    Replies
    1. Many catalysts hitting this month. The perfect storm.

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    2. If we get to 105 XIV in the next week or so...SPX could be 100 points lower from here...Interest rates rising as well...

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    3. hmm UVXY getting smoked...

      Delete
  76. Bitcoin crash intensifying. Now in the $8,000's.

    SCJanuary 16, 2018 at 3:04 PM

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

    SCJanuary 11, 2018 at 12:15 PM

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

    ReplyDelete
    Replies
    1. bitcoin you are right again also your right with early pop in xiv nice call overthrew 130 though i sold half of my position in short and long at 13 going to buy back

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