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Am in total agreement with GB's VIX view. I have a feeling that this end of
June quarter is going to defy traditional TA and be overridden by end of
quarter "tape painting" to get the performance bonuses by fund managers.
VIX might even drop a tad below 20 in such a rally. FOMC or no FOMC those
bonuses have to be made so the upside might suprise us all for the next week
or two.
Regarding yesterday's trading I would like to throw in a chart that whose
behavior is seen quite often. The levels defined by pivot plus/minus half
of the previous day's range, and the pivot plus/minus yesterday's range
provides support and resistance on a rather frequent basis. It takes no
astrology, no monetary analysis, no volatility analysis, just the previous
day's H,L,C to calculate.
Bob
----- Original Message -----
From: Gitanshu Buch <OnWingsOfEagles@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Tuesday, June 20, 2000 5:46 AM
Subject: [RT] RE: nd/sp500 and VIX
> >short term bearish
> >b: vix in a solid sell
>
> Regarding the VIX:
>
> Due to VIX action in Mar-May, the statistical volatility of the VIX
exploded
> way beyond its long term historical mean. causing a "hump" on the long
term
> historical mean.
>
> Whenever this happens, the long term historical mean tends to come down to
> its normal level. and this is made possible by the short term historical
> mean staying well below normal levels.
>
> The top plot will show this tendency.
>
> The bottom plot will show how this appears on the VIX chart, as well as
the
> seasonal tendency indicated below.
>
> Therefore I would not draw conclusions regarding implied vols being too
low
> right now indicating complacency, because the current low readings reflect
> more of the mean reversion process caused by a sort of tiredness by having
> been too much on the edge recently - and less of the complacency process.
>
> To put it another way, rhe recent levels of fear were so high that the
fear
> has subsided or is subsiding. Does not mean that complacency has set in.
>
> Sustained low VIX will imply either or both of two things:
> a/ Complacency
> b/ Seasonal low volatility to be expected during the early summer.
>
> I think it still needs a few weeks work to tip the balance from "reducing
> fear" to "increasing complacency".
>
> Just because VIX is at 22% doesn't make the market a sell. Gotta see how
it
> got there.
>
> This is a judgement call on the "tone", so I may be wrong.
> But this is how I call it.
>
> Chart attached.
>
> Gitanshu
>
Attachment Converted: "f:\eudora\attach\FTzones.gif"
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