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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (54275)	4/22/2002 12:34:30 PM
From: chainik	Read Replies (2) \| Respond to of 99280

"Vix and Vxn indicates extreme complacency as it has for several weeks" Justa, hard to argue with this; but today looks different because the market is down big time, only a few optimists are left on the thread, Zeev is turning bearish, but sentiment indicators strangely stay put.

To: Justa Werkenstiff who wrote (54275)	4/22/2002 10:24:42 PM
From: Joe Smith	Read Replies (1) \| Respond to of 99280

I am not sure that you can necessarily equate the Volatility indicators with "Complacency". Complacency is only one possible factor that might drive these indicators down. They are not actual indicators of complacency as such. Rather they are indicators of the "preciousness" of options contracts. When we see them hit lows like they are hitting and even staying down in the face of selling pressure, we must note that something else is going on here. The VXN barely budges yet there is 87% down volume in the Naz. There is clearly a disconnect between the VXN and the Naz, at least for now. What is at work here? Why are options getting harder and harder to sell? Why is the premium getting smaller and smaller? 1. We are in a channel and the options brokers expect us to stay that way. Until we break out of the channel the volatility indicators will continue to drag. These options brokers see nothing to pop us out of the channel between 1695 and 1934. 2. There is exhaustion of interest in the market in general leading to a loss of premium. 3. There is complacency and little panic as things get worse and worse, threatening some kind of capitulative selloff that will drive the volatility indicators back into their normal range. I believe that at this moment one can rank the three factors in that order. The fact that sell-offs do not drive the volatility indicators is a danger sign in some sense but it also is not an immediate one I believe. There is no direct correlation between the volatility indicators and the movement of the Naz. For now, they are therefore not an effective indicator. When they do get back in synch with the Naz, I do agree that things will get ugly as they will then tend towards their normal range. I also believe that this would require a dose of momentum that would actually reignite interest and volume on Wall Street. I cannot see what that would be any time soon. So, I must agree with the option brokers/ sages that we are rangebound. They will exhaust us with this for a while and then we will capitulate. Then we will have a bear market rally and perhaps we will start the cycle all over again until this bear is finally done. When? Who can say? A double bottom with 9/21? A new bottom? Or perhaps a higher bottom? Take your pick. For now, they seem to be doing a great job of destroying everyone's models very effectively. The best of market timers seem to be at sea.