The story of the day on Monday was definitely the old Volatility Index -- the now-dubbed VXO -- which hit an intraday low of 18.02, before closing just above that at 18.16. I'm still fond of this old VIX, calculated off the pricing of S&P 100 (OEX) options, as we've got a rich real-time history to work with on this particular indicator.
Besides, the new VIX and the old VIX are about 98% correlated, so I figure we might as well just keep it "apples to apples" and continue to follow the old one closely.
The VXO at 18 is quite a thing, in and of itself. It shows a major surplus of complacency and denial about the prospects for a major sell-off. There's just no expectation of volatility. It's as if nobody in the world is worried about the downside anymore.
Bulls are quick to point out that during the 90's bubble...... uh.... rather.....bull market, the VXO spent years down there in the low teens. But let's be real. That was the biggest financial mania in the history of the world, and it's ongoing even to this day. We're even building a successful "echo-bubble" right now, complete with fantasy-level overvaluations and gigantic momentum-driven speculative runs. At this point, there isn't really a question of whether this is a bubble or not, the only question is how far the bubble can run this time around.
I won't have much of an appetite to speculatively short the market above 1060 on the S&P 500, as that will signify that this new bubble is getting traction. Perhaps counter-intuitively, it will become easier and easier to inflate the market higher from there. It will be a "healthier" more self-sustaining bubble above that point, with a major feel-good vibe feeding on itself and reinforcing the bullishness. It's entirely possible we could see 1150 on the SPX in fairly short order if 1060 is convincingly captured.
But while the SPX churns around below 1060, and the VXO hovers near 18, then we have to watch very intently for a shorting opportunity. This is an extremely interesting juncture right here.
This is where the bear market can be vanquished, if it's going to really happen. I have my doubts that a rise over SPX 1060 can bust out and stick, given these obscene levels of bullishness -- but really, who cares about my doubts? The market certainly doesn't care. I'm just another input among millions into this fascinating non-linear chaotic system that is the market. The output for this complex system is price, after all, and the chaotic swirl may still be holding a few surprises for those who like to bet against the majority.
But I want to stick to the game plan, because we're coming up on another low risk shorting opportunity here, similar to the previous one back there at SPX 1024. And low risk/high reward opportunities are all we can ask for from any market.
The VXO has now dropped down to 18, making a dramatic new momentum low, but price has failed to bust out to dramatic new momentum highs. That's a bearish divergence, so when the VXO now makes any sort of momentum move up from here, that will be the time to pounce on a speculative short. That will be the early clue that some real selling pressure is entering the market.
At this point, after so much congestion and false movement, I'd also like to see my 150 chart start a downtrend too, to go along with this VIX/VXO sell signal. The chart below shows the fractal dimension, a nifty trend/congestion indicator, as well as a simple 20-period moving average.
I'd like to see this chart start a downtrend too, from these levels of congestion. That would be a darn good short set-up, with just about all the right ingredients in the mix.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: Drained 1.5 points to 0% full of negative sentiment. That's EMPTY!.
SHORT-TERM: The neutral hourly gauge drifted into neutral with a positive bias.
MID-TERM: Progressed 2 points to 96% on the advance side. Confidence did not progress, though and remains meager at a bullish 1 (out of 7).
LONG-TERM: Weekly gauge progressed 1 point to 80% on the advance side but Confidence remained subdued here as well.
BOTTOM LINE: The tank is empty. Bullishness rules the day. The SPX bounced up off the September high of 1040...but only weakly.
The level of the tank is significantly a function of the VIX. Right now the VIX is low especially because the actual 10-day volatility of the SPX is low, 10-day volatility just having risen off its lowest reading since August 30, 2000. And what happened on that day? The final high of the bull market. Before that we have to go back to 1996 to find the actual volatility as low as it was at the most recent SPX local high. And that was 3 days prior to a 5% correction.
In the context of the sentiment picture, I will consider it a sort of minor suspension of the laws of nature if the seasonally week 2H October doesn't show us at least a modest decline phase. Breakouts that come with an empty or near-empty tank have a strong propensity to provoke nasty little reversals. If such a minor miracle does occur, though, we will want to step out of its way and let it run its course. If it's the hand of God at work, then who wants to be on the wrong side of that?
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
#forex4u - chat forex MIRC
O Clubeinvest.com informa que nenhuma da informação
aqui facultada deverá ser entendida como conselho ou recomendação
de qualquer tipo de transacção ou investimento.
