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Strategies & Market Trends : Guidance II -- Ignore unavailable to you. Want to Upgrade?

To: SusieQ1065 who wrote (840)	3/19/2002 11:18:33 PM
From: SusieQ1065	Read Replies (3) \| Respond to of 2077

Excerpt from OI newsletter re: VIX There is no magic number that instantly sets off a panic selling binge but there is a correlation between low VIX numbers and eventual sell offs. Selling occurs when there is nobody left to buy. Everybody who has money has already bought and everyone is waiting for the markets to rise. This causes complacency and the eventual market drop. If everyone of our readers had $1,000 each on July 1st of last year and they were instructed to invest it (not trade it) when they felt the markets offered the best chance of a decent return, how many would still be holding their money? Everyone thought the drop after 9/11 was overdone and represented a tremendous buying opportunity. Doubtless, many would have invested then. As the markets rallied into late December many more would have taken the plunge not wanting to be left behind. Those that felt the market was already overvalued in early January would probably have bought the dip back to the Dow 9600 level at the end of January. There would likely be very few still holding money today as the Dow/S&P are struggling to break that overhead resistance dating back to late spring of 2001. Now you see the problem. Everybody is already invested, or at least the majority of the buy and hold community. The volume is slowing as conviction wanes. The next opportunity to convince the remaining holdouts will come in the April earnings period. If they are convinced then we could make a new leg up. If they are not then we are doomed to slide into summer as those investors who bought the 9/11 dip and the February dip decide to take profits. The VIX is very low because nearly everyone has already voted in favor of a rally. When storm clouds appear over the markets the VIX will climb as investors take steps to protect themselves against a drop either by selling, buying puts or setting tighter stops. With good economic news appearing every day why do you think the markets are struggling to break this resistance? Is it because there are few investors with money left to spend? Despite the VIX comments above there could still be several days of positive movement in our future. The end of the quarter is coming and many fund managers are still sitting on cash they did not want to invest until the next pullback. With no drop in site and positive news every day they may be forced to spend it to dress up their statements. The competition for fund dollars this year will be intense as the non-performers from last year are dropped in favor of a new horse for the next bull market. Managers will not be able to entice cash without showing a promising stable of thoroughbreds. They are buying every dip but the dips are becoming shallower. Should we get a breakout over 10635/1175 there could be some serious buying and short covering. Regardless of what we think may happen we need to keep those stops in place and our fingers crossed. The earnings warnings cycle has been very calm to date but that could change at any moment. Remember, the biggest surprises occur when you are not expecting them.