Trading options in this environment is a psychological nightmare, which is why earlier in the week we highlighted some leveraged stock ETFs that smooth out the bumps in equity curves. Left out of that analysis was UVXY, which is the ProShares ETF for VIX Short-Term futures. We have been trading VXX options, but with VXX expiring in January, UVXY is likely to become a more prominent fixture in our trading.
The two UVXY Buy Signals based upon the daily price charts are both up about 60% without resort to options, or too much angst day-to-day volatility. At their best, the Buys were up about 90% since entry, but ending the week at +60% is still a respectable return for a less than two-month trade.
With end-of-year stock/bond re-allocations over, we can look forward to a resumption of the previously almost uninterrupted downtrend. New lows beckon in January, which include the aforementioned 90% gains from the UVXY Buy Signals. They will have seen triple digit gains well before the Super Bowl, maybe even by next week at this time. Take a look at the DJIA 30 minute chart below and the path of least resistance for the coming week is pretty clear.
UPDATED STANDARD SERVICE TRADING PORTFOLIO
*With December expiration trades now off the board, we are opening up slots for new trades without cresting trade management issues. The next leg down should generate some fresh Sell signals.