I woke up this morning and the Q’s were down 100 points. I sold out. The Q’s volatility (VXN) was 39.32 up +36% over 4 weeks and up +69% for 52 weeks. Apple Vix is 64 up 55% in a month and 92% in 52 weeks. The Q’s are down 5% and Apple is down 6%. Apple represents an overweight part of the QQQ and the XLK (I also sold my XLK), This is an avalanche. I should have sold yesterday but I lost 1% not 5%. It’s only noon we’ll see what 4 pm brings. Overall I made 7% in a couple months on the trade and missed that turning into a 1% profit headed into the red. I now have my 7% available to compound (maybe even in QQQ once again when it quits falling). Buy LOW Sell HIGH, compound the cash get off the mountain the instant the avalanche is happening.
Gold is down 1.1%. GVZ (gold volatility) is 23 down -.04% for 30 days. This is not an avalanche. This is a buying opportunity.
Here is an interesting video on avalanche. The price represents the snow mass tumbling down the hill. The avalanche is caused by built up potential energy under the surface, being released all at once into kinetic energy as price action.
3 Replies to “Avalanche”
If you do not mind , a couple of questions for you:
1. Is ETF (such as GLD IAU GDX) still your preferred way to buy gold?
2. Are VXN GVZ your main buy and sell signals tech sector etf and gold?
Thanks for all you are doing.
I just trade GLD people go crazy about owning the metal but its hard to store and transact unless you pay a carry charge for storage. If it hits the fan enough I need the metal I’d rather own bullets. I look at the specific volatility for the index or stock. VIX for S&P, VXN for QQQ, GVZ for GLD, VXAP for Apple, OVX for oil etc. Apple and Google are overweight in the tech index for example so rising VXAP means to watch VXN and VXAP means to watch XLK which is the tech ETF The trending range of these ETF’s widen out as volatility increases. In other words the SD of the volatility grows to include a wider possible upside and downside price range.
Generally a vol above 30 is bad juju and time to strongly consider selling some So if I own 100K of QQQ and the VXN is 33 I’d take it down to 80K, 35 maybe 60K, The VXN was about 42 which is untradable so I sold out and booked the gains. You can trade for free so if you sell and then decide to buy back, the round trip costs nothing. I sold my XLK when I sold the Q’s, XLK has a little more efficient momentum. XLK opened at 119 and dropped to 113 so I bought it back today made 1.3K and sold it again. Bought it at 113 and sold it at 118, so even though it dropped intraday I rode the drop back up for a $5 profit. On a 30K investment I made 4.3% on a 5 hour trade and sold out depending on what next week looks like I now have 31.3K to invest, compounding the profit. VXN has risen to 42 a 43% increase in the last month a sign of dramatically increasing risk while a GVZ of 22 has fallen 16% over the past 30 days making down GLD a buying opportunity and making QQQ a sale. I didn’t do it but you could also short QQQ by buying PSQ, which closed up on the day. Overall I made about 5500 today.