Replies to post #274040 on Zeev's Turnips Patch-No Politics (ZEEV)

[Dances-W-waves]

Yeah, I know..I read you description after my purchase. Drats!

:o)

[hightecheast]

Zeev, would you please comment?

Thanks ..... Ken
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Here is my read on equity markets right now.

1. Volatility is basically the measure of quick changes in prices on significant volume.

2. Since we had some real volatility on the upside in early 2003 (the two red arrows close together on the right), U.S. equity markets have been moving slowly – and more slowly – especially in 2004.

3. The danger is that volatility is due to increase quickly and significantly. Sometimes, this is a good sign, but very rarely.

4. The chart below is a ratio of volatility on the S&P 500 (the VIX) against the COMPQ.

5. All of the spikes on the chart are marked with red arrows. This is when volatility increased quickly and suddenly. And with the exception of the two red arrows in early 2003, they were all market bottoms.

6. The two blue arrows mark almost no volatility, and were the “tops” on the COMPQ in the year 2000. Perhaps incorrectly, I do not think that we are headed for such low volatility even probably for years to come.

7. My conclusion is that we will have another spike in volatility between now and October of this year.

8. If the overall market starts to perceive that economic recovery is not only stalled, but headed for a slowdown (or negative reversal), that negative spike in volatility could occur anytime.

9. Could we soon have a spike in volatility driven by increasing COMPQ prices. YES, of course we could.

10. But considering the huge macro-economic imbalances, I would bet on a moderate rally in August, and a big slump in September-October.