Don: Re: "I am not impressed with the performance of the SOX, since per my short-term technicals it is lagging the NAZ/NDX(specificly talking about the short-term technicals not price movement). As we all know, the SOX has been a reliable leading indicator for the NAZ/NDX, so unless the SOX can pick up some steam, Im will suspect that the NAZ/NDX could weaken quickly."
Normally, I might be concerned with this point as it sounds reasonable. BUT one should note that during the April 4th bottom, the SOX not only lagged by a few days, but it also retested its lows on April 9th whereas the COMP did not. The COMP gapped up and did not look back. The COMP lead that rally; the SOX followed. So it is reasonable to think then that the SOX must participate but does not have to lead the initial up.
stockcharts.com[w,a]declynmy[d20010318,20010430][pb50!b200][iUb14!La12,26,9!La12,26,9]
stockcharts.com[w,a]declynmy[d20010318,20010430][pb50!b200][iUb14!La12,26,9!La12,26,9]
Re: "MIDRANGE READINGs already, but what is bothering me now a bit more is that my VIX reading is aready a BORDERLINE CLASS 2 BUY(inverse to market). If tomorrow is up nicely, the VIX will hit a CLASS 1 BUY implying that selling in the indices could start as early as THUR. As mentioned previously, this CLASS 1 in the VIX could also just be a down oscillation within an up-swing in the market, Regardless, if the market is up/flat tomorrow, I will be cautious on the long side and may close/hedge my longs."
I don't view a VIX at the 40 level as a sell signal at this point. We are close to the VIX levels at the April highs. Still a good deal of fear here. Looking at the 1998 initial low of August 31st and then the retest of mid October 1998, the sell signal on the VIX was 30 and change which corresponded with the high in the interlude rally before the retest. During that interlude rally, the VIX jumped around in random fashion:
stockcharts.com[w,a]declynmy[d19980818,19981030][pb50!b200][iUb14!La12,26,9!La12,26,9]
Here is a chart of the COMP for that period:
stockcharts.com[w,a]declynmy[d19980818,19981030][pb50!b200][iUb14!La12,26,9!La12,26,9]
Historically, in times of market tension, a VIX reading around 30 has proven a good sell point if one believe a retest will occur in short order. |
