Wednesday, August 08, 2007

VIX hits 20 DSMA

Two positive indicators today.
The Qs 3/7 DSMA cross was solidly up, confirming our buy signal yesterday. With the pullback in the last hour, we are now set up to continue the rally tomorrow.
The VIX came down to the 20 DMSA precisely. I was surprised that it happened so quickly, but the VIX is now showing a complete rollover with the MACD histogram advancing below the zero line. Again, the close was not at the lows, so the setup is for further VIX decline, with the 16 range possible, but the 18 range more likely before a short term retracement.
Carl Futia has some interesting charts today. Take a look. His July 30th post on the domed house pattern was dead on, and he's looking for the next turn around Sept. 15th. This weekend I'll post some VIX studies that support that projection.
One problem is that most observers believe we have seen the bottom (or quick double bottom) and are now headed back to 14,000+. The sustained level of buying today of pretty much everything supports that notion. The TRIT and NYAD both stayed solidly bullish all day, with the exception of that lighting sell off (and you think the markets are random?) so that the generals could run the stops and pick up some cheaper inventory. However, volume today was not exceptional, which suggests that not everyone is buying into this rally. Any bad news, or other perceived excuse, could cause a little panic here if buying dries up and reverses. The wide range days we have seen lately may subside for several days in setup for next week's expected expiration rally.

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