It remains incredible just how manic-depressive this market is. Even the cheerleading maniacs on the two main clown channels were getting back to their usual 'its all fine now' proclamations. From them being on suicide watch last Friday, to them again gleefully looking forward to the rest of the year, truly bizarre.
A new chart to consider
To end this Friday, and lead into the weekend, I've a new chart to throw out into the murky corners of the internetz ;) This should be quite interesting to some of you, since VIX across the last few years has been one of the most dynamic and profitable trades available.
VIX, weekly, scenarios
Summary
The VIX high of 89.53 - Oct 20' 2008, seems impossible to ever reach again to most. Certainly, the cheerleaders on the clown networks would never believe we'll ever return to those levels. VIX 80s are clearly impossible, right? Just last evening I put together the new VIX scenario chart....
...and just this morning on Zerohedge I noticed this story
Citi Matrix Outcomes If "Disorderly Grexit", then VIX at 80
It was very pleasing to see someone else - a major financial institution no less, open to the idea of VIX back to the 'end of the world' 80 level, if things do unravel in Europe.
So which VIX scenario?
First, a reminder on the sp' monthly index scenario chart....
Sp, monthly, scenarios
My outlook since the world indexes started to rollover since January was for the sp' to cycle down to the lower channel/wedge line of 1100 or so. I've been very reluctant to target anything lower than 1100 - not least since we know the Bernanke will be looking to initiate further QE. So, scenario B remains my 'best guess' for this year on the indexes.
In terms of the VIX, that would likely equate to scenario B, where the VIX breaks into the high 30s/40s - but not above the recent highs of summer 2010/11 of VIX 49.
Lets be really clear about one thing...a VIX over 50, and we're in a whole different world again, the world of economic 'omg, is the end here?', full worldwide market terror. We've not seen VIX 50s since the March 2009 lows, so it would be a VERY significant level to break.
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My general outlook is that the world indexes have a high probability of flooring by late July/August (IBEX 5000 for instance)...with sp'1100....and at that point the Bernanke will appear, to initiate a new round of QE. Not just bond curve manipulation - the QE twist, but old-school QE1/2 style, via POMO..and the bears sure should remember how those POMO days worked out for the equity/commodity markets.
As for the other VIX scenarios...
A - seems almost impossible to envision VIX remaining low across the summer, that would assume sp' does not break any lower than sp'1266. No way.
B - as noted above, remains my best guess
C- A break over VIX 50, and yes, I can imagine VIX briefly spiking into the mid 60s, in terms of the index scenario that would probably equate to scenario D.
D- Very viable, if we get massive summer upset, but the Bernanke appears (along with other central banks) to do more QE, which inspires a substantial rally.
The Outlook
So my targets are SP'1100, with VIX in the 40s, no later than late July, and then the Fed' to announce a major new round of QE in early August. For me, with all the charts I have, all the news stories I've read, and consideration of all the many other chartists out there, that is my best guess.
As noted though, if we see sp' break under 1100, VIX 50s, and IBEX <5000 (along with the equivalent on other world indexes), then we will be in a very much more serious bearish situation.
Goodnight, and have a good weekend