Friday, October 29, 2010

A Snoozer

If things end up where they are (its noon) then the market will notch its seventh consecutive doji candle Open and close at the same price). One doji means uncertainty. Two is a pretty good signal something is up, as in "in the works."  But seven?

Think of volatility. When it gets very low you can bet the market will do something to make it high and that cycle repeats. Seven flat days is as low in volatility as we can get these days so watch out next week when we finally find out who will be in Washington and how much stimulus the Fed will fling from the helicopter. 

Maybe my VXX will do something for a change besides lose money.

1 comment:

Amalan said...

I agree - and given the other data, I feel a correction coming. AAII as of Oct 27 is at 51% Bullish, 21.6% Bearish. Since the ^VIX index hasn't hit April lows or even Jan lows, I suspect we won't have too much of a correction, but still, the market will probably sell-off with some election result excuse before continuing a rising trend subsequently. Wonder why ^VIX is showing a slightly different pattern, since VXX is showing the lowest in more than a year and a half.

On the one hand, TIPS went into negative yield, showing intense fear (at least of inflation), and on the other hand sentiment index is showing a worry-free state. Contradiction?