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.
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.
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