Friday, August 17, 2007

VIX touches 10 DSMA then heads back up

Amazing how quickly this market turns ... in large part thanks to the overnight FED intervention to lower loan rates .5 percent. And they decide to do it on options expiration. What a coincidence! All the trading gurus that proclaimed Thursday the bottom are now high-fiving and yucking it up. Enjoy it while it lasts.
The Qs shot out of the gate at the open, along with the rest of the market and after an early retracement, chugged along back up to close solidly just off the high of the day, with no Friday afternoon fade. Volume backed off a bit to 223M, which is at the 20 day median.
The VIX is considerably harder to understand. After opening down 6.50 from Thursday, the VIX rose for 2 hours as the general market declined, then basically went into a funk for the next 3 hours as the market chugged up. Then at 5 minutes to noon, the VIX exploded up .80 while the rest of the market was basically dead. I'm still looking for an explanation for that phenomenon and the subsequent behavior of the VIX as it actually continued to rise into the close. VIX got down to the 10 DSMA in one day from a level yesterday that looked like a long, long ways off. Now that the market makers have had their way with the rest of us it will be interesting to see if we get a follow through on this strength Monday or whether VIX will head back to the upper bollinger band. This seems more like a probability than a possibility as the VIX finally closed at 29.99, more than 10% above the 10 DSMA.

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