Here are the CI's after the close.
ST Naz CI: 100.000, 79.835
MT Naz CI: 100.000, 79.835
LT Naz CI: 100.000, 96.498
ST S&P CI: 86.027, 61.361
MT S&P CI: 86.027, 61.361
LT S&P CI: 96.771, 91.072
While the market is extremely overbought, there could always be a breakout to the upside. On the other hand, there could be a reversal to the downside. I have no idea which way it will go. The high valuations strongly suggest the possibility of a move down, but valuations needn't concern irrational, exuberant traders.
Bob W. has pointed out the narrowing Bollinger bands in the charts of the VXN and VIX, and how Bollinger has said that a breakout from the narrow bands can be preceded by a head fake. At this point, it remains unclear which way the breakout will be and which of the sudden moves was the headfake. It's all very intriguing.
The high volatility would seem to suggest that a big move may be on the way. Whether it's up or down remains to be seen. Take a look at a chart of the VXN going back through last year. It hasn't been this low since July 2001. While that could mean that the market is extremely overbought, it could also reflect an underlying belief that the economy is showing signs of recovery. There are never any obvious answers in speculation, except in hindsight. |
