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VIX update for close of August 25, 1997:
The Modified Volatility Index(MVI) held steady on its neutral line for
another day. A wize woman once said "Never short a dull market". The MVI
is acting as dull as it gets. Looking at the DOW you would not get an
impression of dullness. Remember, it is only 30 stocks and is subject to
violent swings by DOW 5 and 10 Index Trusts at the end of and beginning of
the month. It is more important to look at what is going on in the
foundations of the market represented by the issue and volume
oscillators(McOsc825). Notice the feature labled RS in the McOsc chart.
Both lines are expected to push upward into and very possibly through the
neutral region over the next week and a half. It is not adviseable to be
short or in puts in the last week of the month. On the OEX825 chart two
buy signals based on the VIX Z score and OEX put call premium ratios were
generated on Friday's close. The market does not immediately respond to
these signals. It can take a day or two before the direction is reflected
in price. Powerful upmoves are often preceded by sudden downdrafts to
shake out weak players in equity markets as in commodities(stocks are now
trading like commodities). All the signs are present for this move to
occur in the next two to three days.
BobR
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