The SPX and NDX are showing more strength that I expected last few days. Today, we could end up with a bearish engulfing candle on daily SPX. R Option Model still flat even with the strong price action last week.
In a monthly candles we are still below the last month close and high. Also we have 3 consecutive lower highs, and we still have 14 days left in March.
In the quarterly candles, we did not take the last quarter low, the model was ready for such test adding long puts at high VIX levels. This cost me money. One of the model’s objective is long-term capital appreciation cap with protection measured in monthly basis. Last month price action open the door to renewed long-term down pressure. Of course nobody can know when or if we show up from Q2 to Q4 ’18.
The model read similar price action to Aug 2007. Jul ’17 formed a high which was almost followed by a double top with Oct ’17 high. The result of those highs were 4 consecutive negative months on the SPX. I do not think that it will be played just like that. VIX Implosion is not like the Bear Stearn HF collapse. Only time can tell.
I trade under the basis that nobody can predict future price action however human emotions can dominate future price action.