The last several days, the market has done essentially nothing, it's trend can only be classified as lateral, these are times when w see distribution historically, but what is really disturbing is the volatility in an INDEX. Below is the SPY, look how many parabolic moves there are, this is from a lack of participants. This index is trading like a penny stock. The huge gaps, parabolic moves, etc.
The next 3 charts are the SPY, DIA and QQQQ in the longer term 3C, note the similarity in the divergences, all of which are classified as leading at this point although they could be worse. This shows a pattern of underlying distribution. These are uncharted waters with the Fed's POMO, but I sure would be leery of being excessively long right now and truthfully I'd cut my risk back by 50% until we see a resolution.
5 comments:
Excellent point Brandt I have to keep reminding myself this is not a "normal market"!
Brandt,
What does the fact that the VIX is in a rising trend since the 15th of September, as well as the equity markets rising a sizeable amount in that time too. Shouldn't they move in opposite directions?
Or does it suggest there is growing fear in being long?
My understanding on the vix is it is just the longs buying insurance(puts) so they are "shielded" from a drop and aren't forced sellers at that point.
I saw that happen in the VIX before too , at that time it was right before the waterfall sell-off of 2008. I don't know though if it was just chance?
Pink, this would indicate that the trend higher in the market is being questioned by traders. They do not trust that the market can sustain its momentum and want to protect from a sudden drop. This is a good thing if you are short and looking for confirmation. It means more people are sitting there with their finger on the sell button.
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