Rallies Jump Up to Get Beat Down

I covered up some more shorts into this morning's weakness, as discussed in my full strategy video yesterday (available for everyone this week, please see prior blog post). 

However, with the market filling to hold the overnight bounce in the futures, followed by this morning's minor attempts so far, we are still at risk of a crash. Mind you, I do not say that world lightly, and crashes are incredibly rare and low probability events. But history tells us that the elements typically needed for one are present right now.

And I am going to respect that and hold off on any hero dip-buying attempt for now. 

The VIX is finally back in the 30s, surpassing the highs from early-December, which means we are indeed getting some fear back into the market after a bout of complacency. However, we have to allot for a super spike in the VIX, again, as long as equities keep failing on bounce attempts (the VIX went as high as 85 in the COVID crash in March 2020). 

Finally, more bad news for bulls is that Friday's slight, potential bullish divergence with Junk Bonds green in the JNK ETF, is resolving in favor of bears. as seen below on the JNK daily chart. 

Just as divergence tend to resolve bullishly in bull runs, so too for bears in bearish tapes. 

A word to the wise based on my own experience: When rallies in oversold markets jump up to get beat down, step back and wait for a better spot to get in and fight.