Chris: Interesting divergence, since one would expect the VXN to be positive on a down day for the Naz. The VXN tends to move inversely to the Naz.
What I see is a hammer, meaning that there may have been higher demand for calls early in the day, pushing the VXN strongly down, and then bulls began to beat a quick retreat, pushing the VXN back up to near where it opened. Even at the end of the day, though, sentiment wasn't bearish enough to push the VXN up into positive territory, showing that there may still have been some bottom fishing going on, or at least some indecision.
The candlestick (the hammer) might be revealing, because it might have marked a bottom for the VXN for now. I say might, because who knows? It could still fall tomorrow, if there were a rally, of course. That would make it a failed hammer signal, and it could be interpreted as bullish (if it happened, which remains somewhat doubtful at this point.) But if it stays above the lower end of the black body of the candle, the VXN is probably going to continue on up from that hammer, meaning the Naz could continue down. What this means is that demand for puts would increase.
If the VXN had moved decisively down on a down day for the Naz, that might be an argument for a rally soon. But that's not the case here, particularly since there was a failed rally earlier in the day. The divergence isn't so clear here, and it's not so simple as that, it seems. The VXN candlestick seems to show a quick retreat from a strongly bullish stance earlier, to a state of indecision -- maybe a turning point. If the VXN moved strongly up tomorrow, that might indicate that bulls had decided to run for the hills. The hammer makes it look like the bulls had run to one side of the corral and suddenly reversed course. The panic could continue tomorrow, for all I know.
The VXN aside, I think Challo's QQQ chart last night was clear enough. You don't really need to look at the VXN to see it. Even stochastics gave a clear signal. And it sure wasn't a buy signal. Also, that chart showed clearly how the QQQ reached for the 50 SMA and bounced off it. Another bad sign.
Pretty negative, huh? Well, the market has a way of defying analysis. So there could be a rally tomorrow, for all I know. I have no idea where the market will go. It's all guessing. S'all a lot of hocus-pocus.
If I knew precisely which way the market was heading, I wouldn't be typing this from under a highway overpass. To precisely predict the market, one needs e-waves, and I can't find any around here. Landlocked, ya know. |
