NFP overcooked at 321k raises the suspicion that the Fed could raise interest rates sooner and at a faster rate than expected.
Some calling for a short SPX dip now before the santa rally kicks in mid December. Time is running out, but perhaps the SPX will continue to climb until later in December before retreating in the latter part of December like it did in 2012. Either way would set up a good short term UVXY trade.
History.
First remember that UVXY has had a few consolidations, but it is only the % changes that are important.
UXVY was flat in Dec.2013, but the SPX was also relatively flat before a mild xmas rally during which UVXY declined about 25% before spiking 57% in late Jan.2014. Hence, last December is perhaps not a good model for the present for the short term, but all was good in the longer term.
On 6-Dec-2012 UVXY closed at 20.8 before drifting down to close at 17.6 on 18-Dec-2012. This would have been a good time to average in as subsequently UVXY rallied to an intraday peak of 29.2 on 31-Dec-2012. That is, a 66% gain from the low on 18-Dec-2012.
December 2011 was a not a good month for UVXY, but perhaps that is too long ago and people were still getting used to UVXY because this ETF only commenced on 3-Oct-2011.
This year has seen UVXY spikes in late January (57%), April (26%), August (57%), and October (118%). When is the next spike due?
How to play?
Buy in now and average down in stages if UVXY goes below 18.
If UVXY bottoms and rises (after averaging in), set a trailing stop with a reasonably wide berth to secure a guaranteed profit, but not so tight that larger moves up are missed.
Set an ambitious profit taker stop say 30% above the previous nights close, adjust daily. Surely everybody would be happy with 30% in one night.
Does the above sound like a strategy, some may consider it practice, or will it be a case of tell him he is dreaming. Whatever the answer, I am in albeit with a relatively small volume.
