AI
Tuesday, November 11, 2003 9:55:54 AM
Here's an excerpt from 21st Century Alert morning briefing. Maybe MSFT's inquisition in Europe starting tomorrow will be what gets us started down.
That uptrend looks complete to my way of viewing markets. This now sets the stage for a down fractal, and it could be a nasty one. This market is in such a shockingly complacent mood that it has everybody now believing that the "VIX doesn't work anymore." Implied volatility, as measured by the VIX and VXO, has been scraping along the bottom for months. It's just one of those rare deals. Every 3 or 4 years the VIX needs to be totally and completely discredited in just this way, so it can keep on working for those who still want to follow it as the ultimate sentiment guide.
What this VXO chart clearly demonstrates is that the majority of market participants are sitting on long positions, and they are feeling pretty smug about them. The market will let you get away with smugness for a while -- as we've seen -- but the payback tends to be that much nastier when it comes. When the selling starts, it's going to be completely obvious that this was a pretty crazy attenuated sentiment anomaly -- in retrospect, at least. It certainly doesn't feel obvious now.
I also want to re-print the latest Nikkei/Nasdaq comparison, as our Contributing Analyst Tom McClellan has just updated his chart following yesterday's close. (I love when Tom updates this chart, because then I get to use it....as I get tons of requests!)
I'll say it again: no market path is ever pre-determined. But this relationship is spooky in its similarity. A major decline is now staring us in the face, according to this analog. It's also saying that such a bottom will be a pretty darn good place to get long, so we'll have to keep that in mind too.
That uptrend looks complete to my way of viewing markets. This now sets the stage for a down fractal, and it could be a nasty one. This market is in such a shockingly complacent mood that it has everybody now believing that the "VIX doesn't work anymore." Implied volatility, as measured by the VIX and VXO, has been scraping along the bottom for months. It's just one of those rare deals. Every 3 or 4 years the VIX needs to be totally and completely discredited in just this way, so it can keep on working for those who still want to follow it as the ultimate sentiment guide.
What this VXO chart clearly demonstrates is that the majority of market participants are sitting on long positions, and they are feeling pretty smug about them. The market will let you get away with smugness for a while -- as we've seen -- but the payback tends to be that much nastier when it comes. When the selling starts, it's going to be completely obvious that this was a pretty crazy attenuated sentiment anomaly -- in retrospect, at least. It certainly doesn't feel obvious now.
I also want to re-print the latest Nikkei/Nasdaq comparison, as our Contributing Analyst Tom McClellan has just updated his chart following yesterday's close. (I love when Tom updates this chart, because then I get to use it....as I get tons of requests!)
I'll say it again: no market path is ever pre-determined. But this relationship is spooky in its similarity. A major decline is now staring us in the face, according to this analog. It's also saying that such a bottom will be a pretty darn good place to get long, so we'll have to keep that in mind too.
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