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Strategies & Market Trends : Waiting for the big Kahuna

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To: Oeconomicus who wrote (20465)	6/16/1998 11:21:00 AM
From: P.T.Burnem	Read Replies (1) of 94695

A reading above 30 would indicate that a bottom is near. A bottom? How 'bout simply a significant rise in expected volatility? That's what a meant. Do you have studies to support your conclusion (and not just going back a year or two, go back a cycle or two at least)? Yahoo! has a chart going back ~10 years. I find historical studies going back that long to be of limited usefulness. The market keeps changing. Every cycle differs from its predecessor, partly because of lessons learned from the past cycles, and partly due to rapid technological change. This is why people who use '29 and '73-74 charts as a guide have been underperforming the market. The VIX is a measure of the OEX implied volatility. The higher the VIX, the higher is the probability of a market drop as perceived by professional money managers. By definition, the VIX is a Fear Index. Excessive levels of fear (read: extreme VIX readings) routinely correspond to market bottoms, both short- and long-term. PTB P.S. Another Fear Index is the XBD (Brokers-Dealers Index). This one has the advantage of being tradeable: if you feel the bull market will resume its course, buy MER (and Goldman Sachs, when IPO'd) on a dip.

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