Tuesday Update: Cycle Top


I don't trade cycles, not even in a rare drunkin' stupor. But this chart below has a compelling forecast for the week ahead:

Today the DOW gapped up over 250 points. With such a gap we should expect the volatility index, VIX, to get smashed down. Instead, it also gapped higher.  VIX (VXX) is supposed to move inverse the stock market, but not today. Couple this dichotomy with the chart above and we have the makings for a very interesting week ahead. 


The three bitcoin stocks in the Special Situations portfolio are falling in concert with a decline in the price of bitcoin. Nonetheless, neither OSTK nor MGTI have issued sell signals. GBTC went to cash on December 20th and that in retrospect was an excellent exit with prices 23% lower than on the sell signal. When we get back in we are assured of a better price than when we exited, exactly how the system is supposed to work.


If the cycles and VIX dichotomy are any indication of what is ahead, expect a slew of sell signals in the days and/or weeks ahead. Although the market has ignored the extreme bullish sentiment situation for over a month now, one of these days it will all come together and we need to be ready when it does.