Zeev's Turnips Patch-No Politics (ZEEV)

[Uncertain Walker]

Do you think yesterday or around here was likely a local top or bottom? And what level (and probability) will the market go now?

Over the last month, VXN has been oscillating between high 50s to high 60s, a relative high level for an extended period. This oscillating behavior at high level occurred only once in last three years (I cannot get data going earlier), in march-may 2001. I think VXN will probably go down once it gets out this oscillation.

During yesterday’s market drop, the volatility index VXN and VIX were basically flat. This was also the case last Friday. If VXN continues to go down when market is up and stay flat when market is down, we may see it drops below the oscillation band and trends lower. My feeling is that a rally after the oscillating high level of VXN is probably weaker than a sharp peak in VXN. Also, since the current VXN oscillation area has a lower absolute value than march-may 2001, a potential rally is likely also weaker. I think the VXN picture may correspond to your picture of weaker target (1450?).