Sure enough, Keybot jumped from the bull camp back into the bear camp this afternoon at SPX 1502. The SPX has thrown off two key reversal days in the last five days. The spike in volatility caused the bulk of the mayhem. Bears are fine if the VIX stays above 15.60. As always a whipsaw is possible but the VIX appears to want to remain elevated and, if so, the markets will meander lower. More information is at Keybot's site:
Keybot the Quant
KS, do you think that the VIX is due for a drop given that it closed so much above its Bollinger Bands?
ReplyDeleteAfter such a large move, 34% in one day, it would need a rest, but there are probably additional higher highs ahead for the VIX. The upper BB may run higher for a while as well. The VIX jumped as traders finally ran to buy protection. Everyone was much too complacent, as we have watched with the VIX and CPC put/call. That will be a chart to study tonight to see how high it spiked, $CPC. You only want to use the VIX as a fear gauge, watch it for that reason only, it is probably best to avoid trading, the VIX ETF products are some of the most speculative and dangerous ETF's available.
ReplyDeleteCPC closed at 1.15
DeleteVery interesting, for such a drop you would expect panic and fear, and there is none. The CPC needs 1.20 or higher to signal panic and fear so traders continue to believe that the Fed will always save them, and politico's will always kick the can.
DeleteSince Chairman Bernanke will speak tomorrow, traders simply figure he will talk about dropping money from helicopters so there is no need to ever worry. This is getting very interesting now. It would be interesting if he said he has limited booze remaining for the punch bowl. Markets should fall much further since people must experience pain, panic and worry. Traders still act like they are at Club Med each day.