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

To: Follies who wrote (25630)	8/29/1998 8:31:00 PM
From: Bull RidaH	Read Replies (1) \| Respond to of 94695

Dale, A pattern had projected up to 45.5 on the Vix for a reversal point, so Friday's movement up to 44.5 was close, but I don't think we'll see a sustainable short term rally until 45+ is touched. We need 1.20 or better Monday on the closing Trin to give a Trin5 s-t buy signal as well, so it's very possible this could all be accomplished by Monday's close. Many of the patterns I'm noticing are calling for a little more down now than the 1012/8000 level. Some call for a little under 1000 on the SPX, and around 7880 on the Dow. From those levels, I expect a few days of mild rally/sideways action, before things start to turn down hard after Labor Day. As the devastating drop under 1000 SPX/7850Dow begins, substantial patterns calling for 887 SPX / 6900 Dow should begin to drive the market to these targets, and to the delight of the bears, by option expiration. We have a futures contract switchover (to Decemeber) coming the trading week following Labor Day, and that is nearly always a time when weakness in the futures market can get out of hand. The high Vix levels should be expected as recent rule changes gave general equity fund managers the ability to profitably hedge their portfolios with options. So that's why puts are so expensive...tremendous demand for them that wouldn't have been a year ago. As for what the high level of Vix tells us about future market direction... Absolutely nothing. The market bottoms when vix tops, and tops when vix bottoms. A relatively high vix doesn't tell you anything except that we're in a down trend. The real way to make vix useful to you is to analyze the vix chart, and spot the pattern that projects how high vix will go before it reverses. Once you know this point, it will provide confirmation to you that the time for a reversal/bottom is at hand in the market. Longer Term, I'm seeing a need for 50 to be touched on vix to signal in intermediate term (2 or 3 month) bottom is in. Brinker is probably right about buyers at these levels being rewarded in the next year. But they will certainly be punished first, and the "reward" will only net them a couple percentage points when the market rallys from its mid Sept. lows of 890 SPX back to the 1050 area by year end. Regards, David