About Bitcoin

In response to an insightful reader's request, along with increased attention by the financial media, this week's Digest includes a brief look at Bitcoin and its potential influence on the equity markets. First, the customary Market Review followed by an update on last week's ProShares UltraShort S&P 500 hedge idea.

S&P 500 Index (SPX) 3709.41 gained 45.95 points or +1.25% last week after making another key reversal on Friday and another new intraday high at 3726.70. Could the algos have sold to the top like they did the week before?  Key reversals are minor trend change indicators defined as a higher high for the recent trend and a lower close, forecasting a lower low the next day. If the pullback continues, expect first support around 3600 and then the 50-day Moving Average at 3547.94.

iShares Russell 2000 ETF (IWM) 195.34 added 5.63 points or +2.97% last week twice the % gain as SPX as rotation out of previous leaders into laggards continued while retaining the "decider" title once again.

Invesco QQQ Trust (QQQ) 310.06 gained 8.21 points or +2.72% and like SPX made a key reversal on Friday so expect it to make a lower low today. While the % gain exceed the SPX, it was just short of the IWM. The VanEck Vectors Semiconductor ETF (SMH) 217.16 up 4.65 points or +2.19% last week, also better than the SPX, but not close to the December 8 intraday high at 221.79.

CBOE Volatility Index® (VIX) 21.57 slipped 1.74 points or -7.46% last week. Our similar IVolatility Implied Volatility Index Mean, IVXM using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option, also declined 1.74 points or -9.15% ending at 17.27%.

In the IVXM chart below, notice how the 30D HV (Historical Volatility), blue line, leads the IV Index, orange line, lower.

VIX Futures Premium

This next chart shows as our calculation of Larry McMillan’s day-weighted average between the first and second-month futures contracts as of last Friday.

With 22 trading days until January expiration, the day-weighted premium between January and February allocated 88% to January and 12% to February for a premium of 12.13% in the green bullish zone.

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Disclaimer: IVolatility.com is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter ...

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