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To: Teresa Lo who wrote (51918)	7/20/1999 4:42:00 AM
From: Teresa Lo	Read Replies (1) \| Respond to of 86076

Morning Market SnapShot for Tuesday, July 20, 1999 In our column dated Friday, July 2, 1999, we covered the CBOE market volatility index and the basis of Bernard Schaeffer's use of Bollinger Bands to mark short-terms highs and lows for major market averages. Mr. Schaeffer said, "As an oscillating indicator, the VIX generally helps us predict future market performance by gauging the level of fear in the market following a pullback. Although a complete discussion of how the VIX and OEX are related is beyond the scope of this discussion, our research has shown that a generally inverse relationship exists between these two indices. The Bollinger Bands we use are drawn two standard deviations above and below the VIX 21-day moving average. Because the VIX oscillates, a break above the upper band indicates that the index has reached an extreme high and will shortly begin to move in a downward direction. This band break would therefore be a bullish sign, since the OEX and VIX are inversely related. Conversely, a VIX move below its lower band would have bearish implications." We mentioned in yesterday morning's comments that the VIX did indeed tag the lower Bollinger Band on Friday when the mood of the market, as evidenced by popular media, was quite euphoric going into option expiration. We also mentioned that we would be watching market internals for first signs of deterioration. Both the S&P 500 Index and the September S&P futures opened higher at another intraday all-time high, sold off immediately, and ended the day at the bottom of yesterday's trading range. This is characteristic of a weak market, and today's action, and outside-down day, formed a Japanese candlestick named “bearish engulfing”, marking a day where control turned over to sellers. New 52-week NYSE highs were down for the second day in a row. They still outnumber new lows by almost 3:1 but this ratio has been deteriorating over the last couple of days. Of note is the fact that the market has been moving higher in terms of points, but the 10-day moving average of high/low net differential has still not exceed that made at May high, forming a nagging divergence. What do we make of all this? First, the S&P 500 remains in an uptrend, as it is trading above the 20-day exponential moving average. So long as any pull back finds support at the 1380 area, there is no cause for concern but we need to monitor market internals carefully. Charts specific to these comments have been posted to intelligentspeculator.com