Wednesday, October 08, 2008
Greek myths, the market, and the bottom of the box
The Nikkei dropped over 7% today, hitting 2003 lows.
So odd to see transpiring in slow motion the mess that has for so long been talked about and predicted. Ever since my interest in the markets was ignited, the more rabid bears have given the "big" breakup coming a daily urgency, as if the moment we woke up the next day, we'd see the dead walking the earth, clothed in rags, eyes vacant, searching for food, now scarce. However, day by day, the day of reckoning was pushed out in the future. It would happen after this rally, after that bubble, after this this next new thing.
It feels as if at least some of that future is here...the mess behind credit markets, investment banks, mortgages...it's pretty ugly and aside from all the jokes about broken clocks, 'they' were right. The work now is to rein oneself in from swallowing the hook, line, and sinker in one go. How awful to be your own best reversal indicator and not know it!!
My cat Boris, bless his dear departed cat 'soul', was once mewing mournfully at me. I wondered what was wrong with him as he was fat and just as fiesty as ever. I leaned over to pet him, stroking his back and tail. Then, this horrible thing happened. As he just sat there, a sickening pool of yecky greeny stuff oozed from him! He had a hidden abcess!! The pressure from my hands was enough to burst it. I took him to the vets as, after I drained it, it was enormous...you could almost see to his bone! He never, until that moment, gave a sign that he had such a terrible problem. I should better say, I never saw the signs. They were subtle, even for such a talkative cat.
You can believe I became vigilant after that, regularly checking him for signs he'd been out fighting and getting into scrapes. What's worse with what is going on now, it doesn't seem to me that people will really learn from it. If the AIG execs can go to the spa, on the company,
after they got the bailout...these guys are totally clueless! They just don't get it. They are the zombies, walking glazed eyed through a world of their own, oblivious to anything outside of them.
Two mythical Greek women come to mind: Pandora, the first woman, created by Jupiter as a gift to man, from whom we get the idea of "Pandora's box"; and Cassandra, who, given the gift of prophecy by Apollo, was cursed by Apollo after she spurned him, The curse? No one would believe her prophecies, even after coming to pass. What are we to learn from these muses?
Troy would fall, tricked by a Trojan horse, even after Cassandra foretold the event and they had heard what would happen.
The curious coda to Pandora's story is that, once the box seemed empty, she looked in to find only one thing remaning, hope.
Hope remains once our curiosity has had its fill, or in the worst case, once even cynicism has run its course. From something we can't even see, touch, feel, smell, or taste, the world must be rebuilt.
Here is Alan's update to his Dow "Alan Box"
Labels: alan box, attitude, sentiment
Tuesday, September 23, 2008
$VIX hasn't backed off...
$VIX hasn't backed off from that little box it is making (on a daily basis) in the 30s. Looks to me it is coiling for another attack of the prior spike high. VIX is a sentiment indicator and the spikes are interpreted as "fear" indications. As a reminder, I'm thinking a trifecta of VIX spikes, similar to the 2002 group in the chart lower down on the page. That's a weekly chart, so it takes five of these daily charts to make one of those.
I'm thinking 2-3 weeks between each spike. The scenario are rally bumps from "rush to calm fears" money injections-- last week by Paulson and friends, and today from Warren Buffet-- paired with "no one buys that line" reversal sell-off slides. These latter bumps would be preceded by a VIX spike.
chart from stockcharts.comLabels: chart-analysis, sentiment
Friday, September 19, 2008
and now, for something completely different...
I just discovered there is a 105-year cycle in Women's Fashion. Alas, I don't have the original research, just the note someone did study such a cycle. Speculating that we are near the return of this cycle, the way back machine took me to this quote:
Most women's dress in this era was highly influenced by the advancing feminist cause, which after 1903 escalated to widespread civil disobedience by "Suffragettes" (radical suffragists). Women modeled their behavior and appearance upon the Gibson Girl the popular image of the "New Woman". Men's clothing styles such as the suit, shirt, hard collar and tie were worn by women forcing themselves into professions formerly occupied by men. Health fads of the 1890's and 1900's also encouraged women's sporting activities, particularly bicycling, which, in turn promoted sport clothing as a fashion.
image from costumes.orgLabels: cycles, sentiment
Thursday, September 18, 2008
the first VIX study, circa 2003 :)
I found it, buried on an old page with wierd links etc...I've learned a bit more about web navigation since then, thank goodness!
It's at the bottom of the page, but here is the chart, from the last days at stockcharts.com, along with the words I wrote at the time. The result was, in fact, a channel with a subsequent upside breakout. Will past be prologue?
This SPX/VIX study came about because VIX wasn't on its own consistent enough to follow the 'VIX is low, time to go; VIX is high, time to buy' thing. I noticed a few things:
(1)The ratio SPX price relative to VIX channels (lowest pane)
(2)Significant channel shifts happen when price is trending up or down
(3)SPX/VIX reversals are good swing indicators, regardless of channel position
(4)'Significant' tops & bottoms are accompanied by channel shifts.
(5)The direction of the 34d, 60d MA (Bollinger Band basis) needs to shift as well to make the SPX/VIX reversals significant
6/6/2003: SPX/VIX finally got out of the gutter channel and into the center turn lane. It hit the upper channel line & is reversing, perhaps a bit like Oct02 with the perhaps significant difference that the 34d MA is turning up and price tested and moved back up off the 60d MA.
I'd look for a strong move out of the center lane to confirm more up. Otherwise, it may repeat the Apr-Dec98 center channeling, which could bode well for a trading range.If this pull back drags it back in the gutter, well, bummer! just another bear rally.
Labels: chart-analysis, market-calls-dated, sentiment
Trader Vix
I could write a whole buncha words about VIX and the old adage, "VIX is high, time to buy, VIX is low, time to go". I did in fact write tons of words on this quite a few years ago, but couldn't find it with Live Search, so when I find it, I'll link it.
This is a very quick study showing VIX in the lower frame in comparison to the INDU. It is a weekly chart, which I believe is the most appropriate for a sentiment indicator like VIX. If you followed every little squiggly VIX low or high, you'd be a dairy maid, churning churning your account. The take-away are the thick orange and green line showing prior VIX/INDU high low clustering.
The first part of my fearless (ie, WAG) thesis here is that the old high (that big cluster of high VIX in 2002) is a very critical test. The current weekly close low has cracked that test, but there are two days left in the week.
I'm not at all suggesting this is an "investor" buy, although there may be a short reaction rally after three days that have set records not seen since 1998 in terms of net down.
The second part of my thesis is that VIX, like the INDU test of the old high, must test its personal high from that same period (see the shaded red box showing the gap). That likely means more downside and a hammering of that thick orange old-high test with a few more spikes, similar to the past hi-volatility period. The potential target low in this WAG is 8000-- based purely on geometric symmetry. I'd hedge that, however, with what I didn't put on that chart, which is a horizontal line under that lengthy trading range from 2004-2006, at about 9500.
I'll revisit this over the coming months.
Labels: chart-analysis, Dow-INDU, sentiment
Thursday, February 14, 2008
Sunspots, War Cycles, and 2012
In November 2006, I published an article on the
relationship of War Cycles to the Sunspot cycle, a theory proposed by Alexander Chizhevsky in the early 1900s. It's a fascinating idea you might enjoy reading about if it is a new concept to you.
I recently discovered that the 2012 doomsday scenario is as well known among gamers as it is among traders. The April 2007 sunspot chart predicts a local high in
2012.
Wierd, eh?
"They flung mud at me," he [Chizhevsky] later wrote, "I was nicknamed not only 'sun-worshipper'—which I took for granted but also 'obscurantist' "
Labels: cycles, seasonals, sentiment
Saturday, October 14, 2006
VIX is High, VIX is Low...
the old adage is...
"VIX is high, time to buy
VIX is low, time to go"
But like many things, it is relative, to prior hi/lo to some extent, and to recent behavior. The later is why so many people have given up on VIX...having nearly flatlined into a relatively low range, they toss it out as if it's no good. However, using rsi as a helper to gauge the relativeness has still snagged the wee pullbacks on this Daily chart. It also works pretty cool intraday.
Labels: chart-analysis, sentiment
Thursday, July 17, 2003
TIKI, PREM on Options Expiration Week
Just , for the record (so I can say 'as previously mentioned', like Big Al did about 500 times during the Senate hearings this week), following is the afternoon 3m chart w/TIKI, PREM alerts overlaying e-mini. Interesting. It would be nice if all days were this good, partic. the nice forkage. Alas, with Chatty Chuck, the last of a long line of contractors working on remodeling the bathroom next to my office, here, I was seriously distracted a good bit of the day and managed only to get a bite of the pie & not a proper slice.
Labels: sentiment
Friday, June 06, 2003
SPX Price relative to VIX
This SPX/VIX study came about because VIX wasn't on its own consistent enough to follow the 'VIX is low, time to go; VIX is high, time to buy' thing. I noticed a few things:
- SPX/VIX channels
- Significant channel shifts happen when price is trending up or down
- SPX/VIX reversals are good swing indicators, regardless od channel position
- 'Significant' tops & bottoms are accompanied by channel shifts.
- The direction of the 34d, 60d MA (Bollinger Band basis) needs to shift as well to make the SPX/VIX reversals significant
As to now (6/6/2003), SPX/VIX finally got out of the gutter channel and into the center turn lane. It hit the upper channel line & is reversing, perhaps a bit like Oct02 with the perhaps significant difference that the 34d MA is turning up and price tested and moved back up off the 60d MA.
I'd look for a strong move out of the center lane to confirm more up. Otherwise, it may repeat the Apr-Dec98 center channeling, which could bode well for a trading range.
If this pull back drags it back in the gutter channel, well, bummer! just another bear rally.
Labels: sentiment
Wednesday, January 16, 2002
OE Kriminals
Wollie Don says to understand price action during Options Expiration "week", you have to think like a kriminal. And the trez nasty close underscores that completely. The DJ swooned to the point of curbs and the Nasdaq woke out of a 3-hour midday narcoleptic nap to stumble off the couch. The thumbscrews come off tomorrow-- maybe.
Unfortunately, the COMPQ closed at 1944, just under the 50d MA at 1951. Overshoot? The last overshoot was of the 34d MA 12/14, when the triangle
did not break. Think like a kriminal!! Gap UP in the morning... or at worst, a flat open-trend up day. The two gap downs on this chart are troublesome... but euphoria usually brings in mo-mo and Bob's your uncle, away we go.
[ removed the chart -- it may be wrecking havoc for some viewers ]
Labels: market-calls-dated, sentiment
"V" for Victory, maybe
A friend asked me for my thoughts regarding a "V" shaped recovery, etc. Here is my reply.
I just can't get excited about the shape of "this" recovery. The idea of a second recessionary wave appeals, if only because it allows a double wave of sell-off/recovery. We can still say we've had a recovery, let another debacle creep in and get sick all over again. Sort of like going back to work too early, before the cold had completely run its course.
Hussman has it right when he writes:
1. Things are really bad out there. They've got to get better sometime.
2. We've got a tingly feeling that the economy will bottom in the next quarter or two.
3. Bull markets typically begin less than 6 months before the end of a recession.
4. Therefore stocks must be in a new bull market now. Better get in before it runs away from us.
5. Stocks are rallying. That's proof that the recession will end soon.
6. In case of fresh bad news, go back to number 1.
Investors are currently tangled in pretzel logic (gg-- so was dubya!). Every hope that the economy is about to recover results in stock buying, and the stock buying is then taken as evidence that the economy is about to recover.
While this has already been said here and there, it does make for at least good writing and serves to underscore that no one knows for sure just now and speculation about the recovery is mostly rhetoric and not reality.
I would add that IMO sentiment is simply not ready to be jubilant, stock gains not withstanding. I clearly remember sentiment during the bubble being very expansive. It just isn't right now. Will it be in 6 months? Who knows. But I'm not ready to buy stocks simply on the bet that it is. Fund managers *have* to buy stocks per their fund requirements. And there are still enough bull-market oriented funds that are more than likely now trading around their positions and as their charter might not allow hedging, no doubt their brokerage house is heavily hedged.
Labels: market-calls-dated, sentiment
