The recent slide in volatility has taken the VIX from a level of 32 down nearly 20, a more than 33% drop. That follows a rise of 50% from the same area in late October, so we're back to that mark. Is that a problem? Unfortunately for the bulls, the answer is YES. Today it may not be a problem, but the lack of fear is not going to propel much higher prices in the interim without the presence of volatility. After all, does the market go straight up and give everyone a profit? Of course not. The market seems to work best when there is some balance or even a slight 'edge' to the other side. For the bulls, the 'wall of worry' is what helps prices rise, while the bears exude confidence from the type of complacency we see today. Again, we are LOOKING for signs, which may appear sooner than you think. We play the game though until the rules or patterns change.
Might not be a bad thing to buy some volatility here as it's quite cheap.
Tag >> Sentiment Indicator
The CBOE Volatility Index (VIX) has been in a range between 20 and 30 since July of this year. It keeps coming back to the mid-level of 25, however. Just this week, we broke above 25 to test the Top Acceleration and Bollinger Bands (see the following chart). Previous tests of this area were quickly reversed lower, in line with a market rally.
However, based on Friday's intra-day activity thus far, it looks as if we are having another run up in the VIX to its Bands. This may correlate with a bit longer period of market weakness than many are anticipating. This is the last trading day of October and looks to be a selling day. Will the first trading day of November come Monday bring more selling?
However, based on Friday's intra-day activity thus far, it looks as if we are having another run up in the VIX to its Bands. This may correlate with a bit longer period of market weakness than many are anticipating. This is the last trading day of October and looks to be a selling day. Will the first trading day of November come Monday bring more selling?
If you've known Price Headley for awhile you're aware of his fascination of Magazine covers. He's written for years about how the media sentiment is a great contrarian indicator. Jeff Bezos as Time's Man of the Year in 1999 was a huge sign the tech rally of the 90's was over. Flashing bears on the cover of magazines, newspapers and news broadcasts is a sign of a bottom. Conversely, when bulls are the rage it's likely the end of a run. Media is reactive not proactive, and in this vein the public reacts to them...and loses over and over.