I still don’t have confidence in the markets this week. We had a strong drop and recovery today that would have been nice to be in VXX for! From what I can tell (and from what I’m reading), this price action is due partially to uncertainty in interest rates and the fear that the Fed will raise them.

Here is what I see in the markets:

The IWM is the ETF for the Russell 2000 (small cap stocks) and often is a leading indicator of large cap market changes. Here is where the IWM is:

The fall through and lack of action above the 20 SMA line means to me that the market has not hit bottom yet. Look how the SPX has fallen through the same line in a less aggressive fashion:

Now, this puts the VXX in a good spot to spike again but it’s still important to find a good entry point. The hard part is that the VXX has already gone up this week so I need to be careful not too chase (buy after the move is mostly over) this. Here’s the VXX chart and the line that I see as risk in the case that the trade goes against us:

Market futures look flat tonight and if things don’t change significantly by the morning, then I’m planning to buy in below $28.60 (selected because this is near today’s low). I hate trying to call the overall market because there are so many external factors (examples: tweets, fed announcements, north korea, and tweets) that can move the market against the trend. My plan is to buy a HALF position this week.

When to get out:

As noted, the IWM is a leading indication of the market movement. I will be watching this to tell me when the market has flattened out and may be turning up.

VIX etfs provide a nice risk profile for shorting the market because they will move up quickly when the market moves down but a movement up in the market will render a less proportional movement in the VIX.