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Today's gap-down "shock drop" in Foreign ETFs was accompanied by a big volatility spike in each one at levels seen in September/October 2011 during large declines in these markets, as shown on the Daily chartgrid below. Volatility is represented by the white histogram which is overlayed on price.
The first thing to say today is that there are some signals here that we may have just put in a very major top, and may now be starting a dramatic fall on equities. There is a potential double-top on SPX targeting the 770 area, a potential H&S forming on EEM that would target a similar scale of decline, a strong Dow Theory divergence that we've been seeing between Dow and TRAN in recent weeks that is characteristic of major market tops and bottoms, and a monster falling wedge on Vix that technically targets the 46 area, though falling wedge targets are missed more often than not. Added to that are the strong negative divergences between SPX and Copper / EEM, and the strongly bullish overall setups on USD and bonds. Levels of bullish sentiment recently are also characteristic of market tops. This is the sort of setup that would make a market crash here obvious in hindsight. 🙂
This is my third post I've done about Color.com, the "company" into which mentally-challenged venture capitalists poured $41 million. Good luck on seeing any of that back, fellas.
In my first post, written eleven months ago, I introduced you to the firm and its, errr, product. In a follow-up post, I wrote about how the company – – which I guess found that no one wanted to use their crappy creation, $41 million in the bank notwithstanding – – repositioned themselves with a product that struck me as even less useful.
So why am I bothering with a third post? Two reasons, I guess. First is that I pass by their headquarters at least several times a week, and although one half of their huge office is completely empty, the other half is covered with butcher paper (for privacy? out of shame? Who knows). So I'm reminded of it.
The other reasons is that it really chafes my hide that I started a successful, profitable company for $3,000 (and sold for millions to the benefit of all our investors) and these kids get an enormous eight-figure check dropped in their laps for something which, in my opinion, is destined to produce a return of approximately negative 100%.
Data released today shows that Europe's Revised 2011 Fourth Quarter GDP declined into negative territory, as shown on the graph below…an area not visited since 2009. Today's figure confirms the prior Flash GDP number…will see if the Final GDP figure confirms (to be released in about 20 days).
