The VIX spikes up, but it rarely spikes down, today’s action notwithstanding…

The VIX spikes up, but it rarely spikes down, today’s action notwithstanding… Read More

The Dow lost a record 628.18 points, or 6.1% in a single week, to settle at 10380.43. The widespread losses across the Dow and S& P 500 indices eventually ended up eroding the year to date’s entire gains after the week dominated by bears.
Wall Street’s fear gauge, the CBOE Volatility index, or the VIX, continued to rise throughout the volatile week, and ended on Friday at a record level of 41.43, at a fresh 12 month high… Read More

The Dow lost a record 628.18 points, or 6.1% in a single week, to settle at 10380.43. The widespread losses across the Dow and S& P 500 indices eventually ended up eroding the year to date’s entire gains after the week dominated by bears.
Wall Street’s fear gauge, the CBOE Volatility index, or the VIX, continued to rise throughout the volatile week, and ended on Friday at a record level of 41.43, at a fresh 12 month high…

<p>I updated the indicators here:&nbsp;
http://bloomblog.spaces.live.com/default.aspx.&nbsp; It’s worth a read as indicators
provide objectivity, a good alternative to panic.</p><p >A few superlatives:&nbsp; VIX is
up 86% this week, 146% in the last two.&nbsp; This represents unprecedented sharp
movement from extreme complacency to panic.&nbsp; It’s time to buy when blood is
running in the streets (of Athens, literally).</p>
<p >EWP, the Spanish ETF, lost 15.7% this week, 24.02% in the last 4.&nbsp; Many
other European countries and even Russia were similarly crushed this week.</p><p >Market breadth has declined more than all post-crash pullbacks, settling
at 15.&nbsp; March 09 and Oct 08 went lower.&nbsp; The market is extremely oversold and
likely to bounce.</p>
<p >SPX fell 6.39% this week, compared to last week's 2.5% decline.</p>
<p >SPY volume Thursday and Friday of this week exceeded all 2009 and 2010
levels.&nbsp; The crash of 2008 had comparable levels.&nbsp; Bounces have always occurred
after SPY volumes this high, but in 2008 were not very long or strong, while in
2009 and 2010, they tend to catalyze long rallies.</p>
<p >I remain bullish and the market is very tradable from the long side at
these levels.&nbsp; However most ETFs have dropped below their 200 day moving
averages.&nbsp; That makes then primed to trade from the short side.&nbsp; Shorting
European and commodity ETFs could be a good hedge for long exposure on USA.&nbsp; A
market bounce is needed though, a significant one, to initiate short exposures,
and then only on the ETFs too weak to move back above their 200 day moving
averages.&nbsp; Shorting immediately into a likely bounce is not recommended.</p> Published By Bloominonion Saturday, May 08, 2010