Thursday, August 16, 2007

VIX hits 37.50 but closes down 6.70

The Qs sailed right through the 200 DSMA at the open (45.40), continuing down to 44.40 before showing a 5 minute bar hairy bottom at 10 (pst), finding a tenuous base and cycling up to finish at 45.62. The 1.52 daily range and the huge volume (362M) only begin to hint at the wild ride that traders experienced today. It was even more frustrating for Schwab clients when the entire SSPro trading platform, the website and the phone lines went dead for about 20 minutes today around noon, and while I could get quotes from other data providers I was unable to access my account and make trades. NOT A HAPPY SITUATION, SCHWAB and I can't wait to talk to Chuck about that.
Once again the VIX was the story.... hitting 37.50 at one point with the DOW down almost 350 points. The range on the VIX today was 7.06 . . . that's a very big number! The VIX is still riding the upper Bollinger band and is not exteremely overbought after today's retracement. When the VIX does retrace to the 10 DSMA, then it's time to gird your loins and prepare for renewed volatility.
I'd like to bang the drum along with our friend above and a lot of the trading gurus, but being risk adverse I'm withholding judgment on whether this was the bottom for a few days. I've got a hutch that the VIX may make another run at 37.50 before we see a real turnaround as we are beginning to see some sector rotation in the face today's action. VIX redux may not happen until next week and I'm looking for select setups to profit for that eventuality.

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