Friday, 16 November 2012

Volatility slumps into the close

With the indexes showing some strength into the close, the VIX closed very weak, and closed over 8% lower @ 16.41. Despite the index declines across the week, the VIX declined by almost 12%, this is a truly bizarre aspect, and all doomer bears should be take this anomaly seriously.



VIX' weekly


A week where the bears were in charge, and yet Mr Market just wasn't concerned at all really. The fact the VIX lost 12% in a week where the indexes all fell, that's quite a strange thing to see. It is pretty remarkable that we've seen the sp' decline from 1474 to 1343, and yet the VIX hasn't been able to break the 20 threshold, not even on an intra-day basis.

Trouble for the bears..or a gift?

I think if we see a daily VIX close early next week <16, that would be a VERY serious warning that we may be about to see a strong multi-week bounce, maybe one that even last into next year - helped by the usual seasonal Santa rally.

My best guess however remains that the general trend is downward, and that any bounces are merely bonus opportunities for the bears to re-short from.

I am seeking a slightly higher Monday open, maybe a few hours of a topping pattern, and then a rollover, with a significant decline across Tuesday, perhaps extending into Wednesday. It is difficult to project a floor for a wave'5, but it could take out this mornings low of sp'1343. 

As things are, even a brief decline into the sp'1330s would seem unlikely to see the VIX >20.

More later.