Trader Alert! Time to Protect Short Positions

I’m in the midst of putting together today’s blog and watching the VIX (volatility index) climb into new, uncharted territory. It just topped 78–an all-time high in this current incarnation, and the way its daily chart is looking, I don’t think that 100 is out of the question. In fact, a check of the movement in the other major indices appears that another significant downturn is in the cards unless they can hold current levels which I think unlikely. Support for the Dow is 8000; for the S&P it’s 800, and the Dow Transports–a leading indicator of market direction–is sitting right on support at 340. If you think things are grim now, wait until next week. It could be scarier than a haunted mansion full of trick or treaters; think Nightmare on Wall Street.

HOWEVER! This is pure extrapolation from what the charts are telling me, and I hope this time I’m not right. Even though I do feel the other shoe in the unwinding of the credit crisis hasn’t dropped yet, I do think it prudent to start protecting your short positions, especially if you’re holding ultrashort ETFs. BUY SOME PUTS OR COVERED CALLS ON THEM NOW! We’ve seen how quickly they can turn against you. Don’t be left holding the bag again.

Protect your positions. DO IT NOW!!!

–A public service announcement from Dr. Kris

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