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On the implied volatility front the VIX and related indicator VIX Zone
score is falling right into place. In the accompanying chart a triangle is
being formed on the 5 day AMOSS timing signal and the VIX Z score is
dropping to lower levels as the VIX inches its way into complacency.
Triangles point to decision points and the first breakout is often the fake
out. Media watchers are led to believe that the market is being held back
by treasury auctions and they will be over on Thursday. Question is will
the market be over the top on Thursday or Friday or is there a one week
delay in the positive seasonality. That is the timeframe that the VIX Z
score is expected to have bottomed in the lower reaches of its -3 to +3
range. An upward pivot in the -1, -2 area is usually accompanied by a sell
signal on the equities market. The historical setup would be for the
market to make a last gasp rally after these treasury auctions are over
accompanied by a final descent of the Z score to the -1 boundary and then
for heavy selling to enter the market. Yesterday there was a put call
ratio on the OEX that suggested Tuesday would be a positive day. That
worked out margninally OK. The numbers for Wednesday show extreme optimism
which needs to be taken with some degree of contrarianism. One days
numbers do not make a trade, but they are falling in line with with VIX
scenario.
Good luck.
BobR
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