How to Trade a Mixed Message?
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How to Trade a Mixed Message?

John F. Carter - February 24, 2016

Hi everybody, this is John, welcome to the free video. Today felt like a changing of the guards, where we've had kind of the big move higher. We did get a squeeze. See here, we're 1-2-3-4-5 dots into it. But it felt like the wind was kind of taken out of the sales today. At the very least, it makes sense that we would come back to 190. So that would be another 20 points to the downside.

But bigger picture: We've come down, we've rallied back to the mean. Do we continue moving lower? I don't think so, actually, but I do think that we're due for a pullback. I mean, by lower, I don't think we're gonna make new lows. I don't think we're gonna go straight down here. I do think it's time to retrace. By retrace, I just mean kind of a normal, you know, retracement here. 50% retracement would take us back to 188, right? So that being said, one of the main things I'm looking at here, one of them is the VIX.

So for the VIX, we have come down to the lower Bollinger Band. We popped up a little bit today. At minimum, I think we come back and revert back to the mean. Maximum, i.e. bigger move, would be coming all the way back there.

So what are some ways to participate in that? One way is just with the VIX futures themselves. One thing I like about VIX futures is that you're not dealing with premium. I mean, there are some things that you to be careful of. You actually need to buy the front month one. That's where all the action is. Things like that. And there are some goofy things with rollover.

But all in all, if this moves higher and you're long, you're going to make money. So at this point, again, just kind of looking for a move back to the mean. I'm essentially risking one point here to potentially make two points.

And I do like GLD here. We had some other trades we were looking at today, in terms of, like Baidu, and things like that, that we got shaken out of, which is normal. That's trading.

So where do we put our money? I like GLD, in this case. Got some March 1 15 calls, and just looking for a retest at this point of these highs. That would take us back to about 121. That's a healthy move from where we are now and there's the potential that we could push higher from there.

And then the other one that I liked was Google to the downside. On this, even during the fantastic rally that we've had, GOOG has had a hard time kind of getting to this resistance. At this point, just looking to see, like, if the market rolls over, Google will most likely come back to that sky line there, and we sold some at-the-money call credit spreads.

So this is a kind of environment where I'm not looking to get too aggressive. This isn't like, "the market's bottoming, let's load up on longs and push it." This is a market where it's like, "all right, we've got forces, it's a little bit more equal here, and we're gonna see some chop, probably some violent chop." We're going to focus more on, first of all, looking for things kind of doing their own thing, i.e. gold, and then focusing more on, like, if Google is going to go lower, are we gonna buy puts? Or are we going to sell a call credit spread? Well, in this kind of environment, we are going to sell a call credit spread. Okay. So that's the kind of thing we're looking at there.

Last but not least, the TRIN yesterday--that's the put/call ratio. I was like, the TRIN is not lining up at the same values as I remember, and that makes sense because that's not the TRIN. Let me grab the TRIN. So how the TRIN works is that when you have a very low reading like this, typically the next day is choppy to down. Here it was down. Here it was choppy. When you close over to, you're actually looking for a bounce the next day.

So now the question is, well, we closed at 1.95, is that close enough? It may be, but technically, it's over 2. So it's over 2, and you can see there's over 2, the next day we started down and reversed higher. We want to keep in mind that while we went in today very overbought, we're going into tomorrow fairly oversold, and if we do gap down tomorrow, I'd definitely be looking to take profits on those VIX futures, and then I'm willing to hold on some of the spreads and gold from there.

So just kind of be careful there. And then we do have a potential plane trade coming up. I'll talk a little bit more about that in the premium video, and it shouldn't be dull.

Okay, and last but not least, we do have a free webinar coming up on Tuesday March 1st. It'll be at 8 p.m. Eastern. That is, of course, 7 o'clock Central time.

I'm branching out into a new theme here. We're going to embrace the volatility that's in this current market. We'll talk about the reasons why volatility can be your best friend, especially if you're a complete newbie and you got a small account. You want to learn how to embrace these markets. My options are the best trading vehicle on the planet right now. Why down markets are better than up markets. By the way, we might be getting ready to go back into a down move, which could be fun. And then how to make successful trades on your phone while you're at work. And this is one of the biggest questions I've been getting, is like, "this is great, I'm at the office, how do I do this without having to stare at the charts all day?"


Just do your name, your email, hit Submit, and you get the registration info. Again, free webinar, and I'm looking forward to seeing you there. It is on Tuesday, March 1st. Okay, you guys have a good one, and we'll see you at the next update.