THE DOT - if this turns orange or red be alert

Wednesday, July 15, 2009

VIX update - general sentiment update

We are in a very interesting stage as VIX has made another 13 count which it seemed to have missed at the recent correction falling back to old levels of normality around 25. I have to admit I misjudged how much people would fall back into the old habits although I knew we would drop in this phase of euphoria for a few months. The human behaviour is highly irrational one can sum up on all kind of occasions. As we are not out of the woods at all but the volatility of market moves has been far lower these days but with probably 70% volume be high frequency machines its an artificial situation which will change quickly as real action returns. Anyway many indicators do confirm that wave 4 is coming slowly to an end although one leg down is still missing. The public discussion on a daily basis by the talking heads about this Head and shoulder formation seems to have taken the momentum out as I was afraid it would do. We are back above what they considered to be the neckline which is not how it is supposed to play out. Well in any case we should see another downleg after this Goldman/Intel hype. Interestingly I do not know if you have noticed to is that the schedule of the earnings reports have been compressed usually it starts slow with a few investment banks and the week after the industrials would come in slowly this time they all come at once quite early. Some important sentiment indicators have come down to red alert levels as the Rydex at .53 which is the lowest level in years which gives just a little room for the bears and supports urgently the 5th wave up very soon definitely in August to new highs as other sentiment indicators are also retreating but not as dramatic as the Rydey. ISEE option indicators have also come down quite a bit diminishing the room for corrections. The only contradicting aspect is the VIX which does not show the bearish bias at all - but that pattern we have now for a while and just confirms that some manipulation is going on.

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