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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Richard Estes who wrote (12016)	12/21/1997 9:00:00 AM
From: William H Huebl	Read Replies (2) \| Respond to of 94695

Richard, You have every right to ask all these questions... and I welcome any and all. But YOU must be ready to defend YOUR position also... "The extreme hi-cap orientation doesn't mirror the market." Jim, the problem with your statement is it is not specific... and to prove that I went back and did a correlation study between NYSE and DOW-30. And guess what I found... - long term (using 144 days as the correlation period) the correlation is running over 55%. This is fairly good considering that rating can go from -100 - 100%. (negative numbers show a negative correlation.) The actual plot runs between plus and minus 90%... but more on that later. - mid-range (using 34 days) is around 55% also and runs plus or minus 70% or there abouts. - short range (using 5 days) is negative 30% meaning there is actually some degree of reverse correlation between the two indices at this time. The value tends to range between plus and minus 95%. A charateristic of an NT personality like myself is the desire to go beyond just the obvious and try to seek other, perhaps more subtle things happening... When you step back and look at the charts and find out WHEN these swings between high correlation and low or even reverse correlation, you find high correlation with the markets tend to want to continue in the direction they are headed over the time period under study and reverse correlation at peaks and lows where the markets are reversing. For example, and you REALLY must be sensitive to the correlation of the CORRELATION with the DOW move to pick this up, on the 5 day plot, we had a correlation pull-back in early Dec as the markets started back up, the markets reeversed and actually INCREASED as the markets started falling and then pulled back to a negative correlation of under -50% around Dec 11th indicating the markets didn't want to go down any further! The last couple of days, the correlation has been increasing during the sell-off meaning (as far as I can see) that the markets want to go further down. To summarize the response to your first statement: the correlation ITSELF of the match between NYSE and DOW is an indication of pending trend reversals. Since this is so long, I will post another response to some of the other items in your post in my next post... Bill -

To: Richard Estes who wrote (12016)	12/21/1997 10:59:00 AM
From: William H Huebl	Read Replies (2) \| Respond to of 94695

Richard, Part 2: Yes, I have and so did Joan who posted yesterday about VIX... and it has been getting higher and higher recently and traded in the 30s for a while there... very unusual from what I've seen. I can't predict ANYTHING! All I can do is give forecasts which, hopefully, have a certain degree of confidence associated with them... but from annecdotal evidence, extremes in volatility TEND to be associated with market tops! And maybe THAT is what VIX is trying to tell us??? Another point about where I think you are coming from... I get the impression you are looking for the perfect indicator, TAers "holy grail." Well most of what I have seen i fairly unholy and you have to read between the lines to figure out what is what. And to be perfectly frank with you, I DO NOT TRUST VIX (yet). As you allude to, indicators have a way of changing in their predictive powers over time and with no apparent reason. So I am just reporting what I see with comments. Bill