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Strategies & Market Trends : Technical Analysis With Charts

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To: pcyhuang who wrote (3200)	10/26/2006 11:02:47 AM
From: Return to Sender	Read Replies (1) of 6865

I know one thing about the volatility indices. You cannot form a true long term market bottom without a huge spike in fear. That means that while the market can continue on higher with low volatility readings indefintely, as it has done now for years, that eventually people will sell stocks in an extreme panic again. It means that we have not had a true major bottom since October 2002. The low volatility readings reflect something that the bond market is not which is faith that the economy is on track for a soft landing. If and when it becomes clear that there will be no soft landing the volatilty indices will rise significantly. If we do get a soft landing then that will not happen at least until we have a major shock. But it will happen again. No period of complacency or fear can last forever. Keep in mind that when fear does rise that the first spike higher for the VIX may not be the last. It took over 2 1/2 years from the market top in 2000 to hit the market bottom in 2002. VIX, VXO and VXN on 6 Month Charts versus the S&P 500, DJIA, NASDAQ and SMH: 3 Year Weekly Charts

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