The Bull is Charging ...

Summary: VIX did not make a higher high value (HH) on 4 Oct 2011. Thereafter the value of VIX was lowering with each passing day. The decreasing VIX value is a sign that investors' confidence is returning to the market. In this study of market bullishness, 7 technical indicators were chosen :

1. price bars formed the higher high higher low (HHHL), zigzag upward trend
2. price bars surged above the downward trend line and resistance level
3. price bars showed gap-up day(s) pattern with higher transacted volume
4. price bars showed the upward ADX trend line
5. price bars showed the upward MACD trend line
6. price bars showed the positive CCI values
7. price bars surged above the 200MA line

Based on the above criteria, each index is given a 7-digits code, e.g. "1234567" means the captioned index has met all 7 bullish criteria, "_23456_" means criteria 1 and 7 were not met. All selected indices listed below except SSEC are displaying bullish trend. In order for the market to remain bullish until the year end, SSEC must follow the rest and turn bullish soon:

DJI : 12_4567, it surged above 200MA @11970. Watch this new support level for market reversal. Next resistance level to look out for is @12800.

GSPC: 12_4567, it surged above 200MA @1274. Watch this new support level for market reversal. Next resistance level to look out for is @1356.

BKX: 123456_, it surged above resistance level @40. Watch this new support level for market reversal. Next resistance level to look out for is @46

GLD: 1234567, it surged above resistance @165. Watch this new support level for market reversal. Next resistance level to look out for is @189.

XOI: 12_4567, it surged above 200MA @1255. Watch this new support level for market reversal. Next resistance level to look out for is @1350.

N225: 123456_, broke free from side way upper channel @8900. Watch this new support level for market reversal. Next resistance level to look out for is @9500.

HSI: 123456_, it surged above resistance level @19000. Watch this new support level for market reversal. Next resistance level to look out for is @21500.

SSEC: _23456_, it surged above resistance level @2460. Watch this new support level for market reversal. Next resistance level to look out for is @2622.

STI: 123456_, it surged above resistance level @2823. Watch this new support level for market reversal. Next resistance level to look out for is @3000

Caveat Emptor

Reading VIX Trading STI - Japan Tsunami

VIX has gaped up again last night and was at the highest level since Aug 2010. As a result, all major US indices were down big intra day following other regional market indices.

Would anyone know that the Tsunami at Japan would trigger such a market sell down? I do not think so. Was there any sign for such sell down? I believe so if the warning from VIX chart is read in the same way I do.

When the market rises to a level with more big players thinking to sell instead of buy the market, the buy orders dwindle and the sell orders start. As a result, VIX will rise and volatility will increase.

Be it technical, non-technical, political and etc, the traders (as suggested by VIX reading) were all waiting to exit the current market in a bigger way for different reasons. They just need an excuse, the catalyst, to justify their action (so as to answer to their "bosses" and shareholders). Japan Tsunami has just provided a major group of big players to lead the exodus from the market.

Will the market go lower? Yes for shorter term (at least for a week or two). The market can only stop falling when the sellers change their perception of the market. That can only be changed when the market has fallen enough to make it look cheap. Before that, the market will zigzag down. In a much longer term (in months to a year), there is a very good chance for the market to exceed the current level.

Given the above scenario, one should be able to decide to hold or to reduce his positions. The reasons for taking up the earlier positions will be the key to that decision. If in doubt, close the position and wait for the next entry signal.

Caveat Emptor, 16 Mar 2011

Watching VIX, Trading STI

The VIX  has retreated in last two sessions of FEB 2011. There may not be a drastic correction to the market for the time being. Do look out for any unusual increase in VIX level ...

Watching VIX, Trading STI

What shall I do with the current market? Should I pick up the recommended bargains or wait and see. Since the traders' fear and greed remain the same irrespective of time and market, the relevant historical VIX chart and the indexes were checked. There are four charts in the attached JPG file:

Chart 1 - US VIX 2011 Volatility Chart (top right)
Chart 2 - US VIX 2007 Volatility Chart (bottom right)
Chart 3 - SG STI 2007 Chart (top left)
Chart 4 - US DJI 2007 Chart (bottom left)

In Chart 2, the spike in VIX on 27 Feb 2007 (Monday) was the triggering day for substantial market correction for the week that followed. The results were :

a. DJI (chart 4) fell from around 12625 to around 11980 (-5% or -645)
b. STI (chart 3) fell from around 3300 to around 2930 (-11% or -370)

In Chart 1, the latest VIX 2011 ending 23 Feb 2011 shows two candlesticks for the latest 2 trading days, i.e. on 22/2 and 23/2. The 2 gaped up bullish candlesticks look suspicious and may be signalling the substantial correction is on its way. The current turmoil in Africa and Middle East provides good excuse for the big players to sell the market as part of the market play. The probability is high.

STI has corrected quite a bit (-307) since the beginning of 2011. Support is seen at around 2900. Should US market fall big as expected, would STI fall through the 2900 support? It is hard to tell but is likely. With uncertainties looming before us, it may be better to stay at side line and wait for clearer signals to pick up any bargain.

Caveat Emptor.

NB: VIX chart is used by some traders to get a feel of the fear in the traders. The higher the VIX value, the higher the fear in the traders. When the fear is high, traders will sell the market.