Our overall market view remains positive. Trend and breadth remain solid - this is the key. For the 9th week out of the last 10, a majority of indices/sectors closed >13ema. This week: all 4 indices and 8 of 9 sectors. Notably <13ema are technology and $EEM, which is now negative for 2013.
Sentiment, downgraded last week, and macro expectations (defined by the Citigroup Economic Surprise Index (CESI), which turned negative this week, are the main headwinds going forward.
Saturday, January 26, 2013
VIX during 2004-2007
While a $VIX under is associated with excellent returns in $SPX, it is not accurate to say that intermediate periods of time will not see solid sell-offs.
For example, $VIX was sub-20 from 2004-07. 2004 was a dog year for $SPX, the other years were very good. Note, however, that $VIX would occasionally 'burp' 50-80% higher during that period, and $SPX would decline more 4-7% for 1-4 months. The notion that this was a period of consistent low volatility is wrong
For example, $VIX was sub-20 from 2004-07. 2004 was a dog year for $SPX, the other years were very good. Note, however, that $VIX would occasionally 'burp' 50-80% higher during that period, and $SPX would decline more 4-7% for 1-4 months. The notion that this was a period of consistent low volatility is wrong
CSFB "Fear Barometer" Hits a Peak
CSFB "Fear Barometer" hit a peak this week. In the past, this has been a good indicator of potential small percentage pullback in equity markets. Whether markets shrug this off and push remains to be seen.
This chart is via the excellent site, SentimenTrader. I recommend bookmarking it.
This chart is via the excellent site, SentimenTrader. I recommend bookmarking it.
Friday, January 25, 2013
Winning Streak Hits 8 Days - A Higher High Ahead
$SPX has just completed an 8 day streak of up days. This is a considerable sign of strength and demand. After a pause, empirically, the market should continue to make new highs. In other words, winning streaks do not end with a notable top.
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