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As much of a kick as it is to see the market get swamped by selling for a few days, it is only natural (particularly given the corrupted construct of this market) that there be some strong buying at some point, such as, oh, right now. Indeed, as I am thumbing through some of the younger charts out there (those that have been public only a year or two and, in recent weeks, have been particularly ravaged), they are the ones hammering out what look like solid short-term bottoms.
All the same, as I look through the index charts, the kinds of levels the indexes are approaching making all the sense in the world with respect to where gaps should be closed or resistance should be met. Even in the context of an overall market swoon, the market action today is abundantly acceptable.
I have been perusing the financial MSM over the past few days and beyond all the usual hyperbole and guesswork as to what the Fed may or may not decide to do there is one thing they all share in common: A total lack of consideration or care as to the long term implications of an exploding Fed balance sheet and an inability or unwillingness to draw correlations to the massive jump in inflation that consumers in and outside of the U.S. are increasingly experiencing. So basically, business as usual!
Just look at this! Volume is withering up so quickly, it’ll soon be just ONE guy (Jerome Powell) and his ONE trading account. Notice how everyone rushes for the doors when the market is selling off but it’s just crickets during these totally fake, Federal Government-created rallies? Pathetic!
I’m sure most people have not noticed this and may even roll their eyes at it because apparently we shouldn’t do technical analysis on the VIX.
I say, if it works, use it.
Personally, I use bollingers on the VIX and find them helpful. A recent observation,however, is what prompts this post. Specifically, that when the weekly bands get about as tight as they ever do, the probabilities of a weekly upper bollinger touch increase significantly and the chances of a weekly upper band overthrow (as what happens in crash-like moves) have a much higher chance of occurring. It appears to me that this forewarned of a potential serious depreciation for nearly every major drawdown over the entire timespan (nearly 25 years). It missed the major declines in the 2008 bear market as the weekly bollingers only squeezed to around the 50% mark, but I feel an adept trader could make this work as well.
I went back to 1998 for this study encompassing two bear markets and two bull markets. The information I’m going to share may work even better as a volatility play rather than a short index play if you can find a way to do it relatively safely (I’m open to suggestions if anyone has some ideas as I don’t play VIX futures or options as yet).
Well, folks, this is what you get what a market is absolutely priced for perfection until the year 3295. You can have company after company announce blow-your-tits-off amazing earnings and prospects, have the stock briefly skyrocket, and then vomit all over its lapels. I didn’t have to dig for obscure examples this afternoon. Allow me to share these tiny, no-name companies with you…………