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
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
Posts
