Is There A Message In The Latest VIX Buy Signals?

In modern day portfolio management, if a respectable manager said he was 40% long U.S. Stocks, most would say that this a "defensive posture". 

And what would most Wall Street analysts say about a portfolio manager who was 40% short U.S. Stocks? They might say he was a crazy man who will soon lose his job!

To me, the risk associated with 40% long is almost the same as the risk of being 40% short, especially if you used the SDS double-short S&P 500 ETF as the primary bearish trading vehicle. With the double-short SDS, a 20% portfolio allocation gives you the equivalent of a 40% overall short position. And because you are actually LONG the SDS ETF, you can never lose more than 20% of your total portfolio, even if the S&P 500 Index vaults to infinity overnight!

Of course, if the S&P 500 Index rallies sharply, as it did this past Thursday & Friday, you are going to lose money with your SDS bearish S&P 500 position, as I did with mine.

Bearish traders and investors sustained heavy losses late last week, but I still think the next big swing in U.S. stock prices is to the downside. 

Here is an interesting chart of the VIX, where three daily chart buy signals have been triggered by my computer trading system over the last five days. If my computer trading system is right, there is about to be a fairly significant uptick in stock market volatility. Sharp increases in the VIX are almost always associated with major downturns in actual stock prices. 

VIX Daily Chart with Computer-generated Buy & Sell Signals