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Going for 2 more cents.
The seasonal trend continues to build momentum. Both the issue and volume
oscillators have crossed above the key zero line into positive territory
and have even broken downtrend lines extending back to the oscillator highs
in May of this year. The issue oscillator is still inside the neutral zone
but the volume oscillator has extended upward with force. This is just
what should be expected to confirm the upward movement in price. On the
implied volatility front we also have encouraging behavior as measured by
the VIX index. Implied volatility continues to gradually decrease.
Excessive euphoria is not present yet. That would exist when the VIX
reaches -2 std dev from its moving average based on the instaneous cycle
length. The daily VIX zone score is still in dead neutral and the 5 day
component of the Adaptive Modified Options Strategy Spectrum is on the
upper side of neutral. Whereas the 20 day and 90 day are as might be
expected in the extremely overbought zone. These factors paint a
continuation of the current rally until the 5 day component becomes
extremely overbought. That could happen in two or three trading days.
Something should be explained about the VIX. It is a composite volatility
of OEX at the money and nearby calls and puts with a constant 30 day
maturity. With the VIX and VIX Zone score remaining in neutral it is
saying there is "balance" in expectations for market behavior. What we are
looking for is a relative extreme in this imbalance as measured over the
current market cycle to earmark a turning point, a retracement point. It
looks like there is more upside ahead of us. One midweek caution is the
Thursday propensity for the VIX to end in the high end of its range. This
means there might be some give back on Thursday or things will heat up a
little as late comers pile onboard just as the early participants begin to
take some profits prior to the weekend. Since the market will enter the
"official" seasonality period on Thursday the tug of war could become
rather wide ranging...a great time to daytrade options.
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