EconomicGreenfield » VIX

Market Overview – Part IV: Stock Market

Ted Kavadas — Tue, 26 Oct 2010 14:23:30 +0000

(this is the fourth in a series of five posts concerning the markets)

Starting with my June 2 post I wrote of my expectation for a near-term stock market advance despite what I viewed as highly problematical future conditions. I continue to maintain this view, albeit with the dangers discussed in the post of October 13, “Comments On The Next Crash“.

Before displaying charts of the S&P500, there are a couple of VIX charts that I find especially notable. The first, as shown below, is a chart that shows the 10-year Daily VIX chart, LOG scale. The 20-level continues to serve as an important demarcation, as seen when one compares the VIX in red to the S&P500 below. As this post is written, the VIX is at 19.85 and has been struggling to stay below this 20-level recently:

(click on images to enlarge charts)(charts courtesy of StockCharts.com)

This next chart is a weekly view of the VIX from 2003, on a LOG basis. I find this chart very notable. The VIX is shown in red, with the S&P500 shown at the bottom. I have added a few technical indicators to provide perspective. Perhaps most interesting is the MACD, which is depicted between the VIX and S&P500. The MACD shows a notable positive divergence (shown by the red line annotation) since mid-2009:

Now onto Part V, the S&P500…

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A Special Note concerning our economic situation is found here

SPX at 1185.62 as this post is written

The Stock Market – Continued Weakness?

Ted Kavadas — Wed, 02 Jun 2010 13:58:16 +0000

With the ongoing problems in Europe, fears of worldwide economic “contagion”, and many overt signs of economic slowing in the United States, one is led to wonder how susceptible the U.S. stock markets are to further declines.

While I have written extensively about how I believe the stock market will face an exceedingly large decline in the future, for now, I think (based upon a variety of factors) that a near-term stock market advance is likely. This is not to say that I think “all is well” with the economy or the markets – anything but. In essence, I think we will see a little more “sunshine” but if one looks out to the (economic/financial) horizon “the sky is black,” unfortunately.

One item that I have found interesting is that during the latest stock market decline (from the 1219 peak in April), while the VIX shot up significantly, the 3-month Treasury Bill stayed stable. Although this is certainly not a “guaranteed confirmation” of any type, I find it notable and positive for the markets and economy for the short-term. Below is a daily chart from 2008 showing the 3-month Treasury rate vs. the VIX and S&P500 (with a 50-day moving average line in blue):

chart courtesy of StockCharts.com

As I wrote on May 19, “I believe that we are building to a variety of major market events.” I plan on elaborating upon this in the near future.

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SPX at 1075.73 as this post is written

Danger In The Markets? Part V

Ted Kavadas — Fri, 06 Nov 2009 14:14:42 +0000

This is the last blog post (Part V of V) in this “Danger In The Markets?” blog series.

I would like to end this blog series with another look at the daily 1-year S&P500 chart. This chart depicts a Rising Wedge from the March lows. As well, I have indicated a potential H&S (Head and Shoulders) pattern in red. For those unaware, both of these patterns are bearish. I believe more in the Rising Wedge than the H&S, as it is more established. Additionally, the VIX can be found along the bottom of the chart:

Chart Courtesy of StockCharts.com

One will note that in yesterday’s post (Part IV) there was a daily S&P500 chart that showed a Rising Wedge pattern as well. The difference in appearance between that chart and the one above is that the bottom trendline is drawn differently – the chart above incorporates the early October low. Regardless, should this Rising Wedge pattern be validated through future price action, conventional Technical Analysis methods would ”measure” a resulting price far below the March low of 666.

As I have mentioned repeatedly on the blog (and these commentaries can be found under the “Stock Market” and “Investor” categories) I strongly believe the rally from the March low of 666 is a Bear Market Rally. The implications of this belief, should it prove accurate, are profound both from a financial markets perspective as well as an economic one.

As I have stated previously, I do hope that my analysis and conclusions as to where the markets and economy are heading are incorrect, and that we are on the path to true Sustainable Prosperity. However, I am firmly convinced from both an economic and markets perspective that we face an array of difficult problems in our economic future and resolving them will likely prove most vexing.

It should be noted that, as mentioned repeatedly on this blog, my views are very contrarian in nature. As such, they are quite at odds with those held by the vast majority of economic and financial professionals who are firmly convinced that we are currently experiencing a recovery with little or no risk of further economic damage…

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SPX at 1066.63 as this post is written

Danger In The Markets? Part III

Ted Kavadas — Wed, 04 Nov 2009 13:34:13 +0000

Moving on to the stock market. First, a 1-year daily chart of the S&P500. Although at first glance, the advance from the March lows doesn’t appear too suspect, two aspects are notable. One can see that currently the price has dipped below the 50 day moving average (line seen in blue -the red line is the 200 day moving average) for only the second time since the rally began in March; and second, the MACD indicator along the bottom seems at best lethargic; at worst, it is a significant divergence from the advancing price:

Chart Courtesy of StockCharts.com

Next, here is a daily chart from ~ mid ’07 of the NYSE Summation Index. I have put in the S&P500 as an overlay in green, with the NYSE Summation Index’s MACD at the bottom of the chart. What I continue to find interesting here is the negative MACD divergence as indicated on the chart, as seen by the blue trendlines:

Chart Courtesy of StockCharts.com

Next is a 10-year daily chart of the VIX. The level of 20 (as seen by the blue horizontal line) on the VIX seems to be a good demarcation of stress. I originally made this observation on September 16, and note how the 20 level seems to have subsequently acted as support.

The VIX has been above this 20 level continuously since early September of 2008:

Chart Courtesy of StockCharts.com

Now on to Part IV…

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SPX at 1045.41 as this post is written

Peril In The Markets? Part V

Ted Kavadas — Wed, 16 Sep 2009 13:44:29 +0000

For this last post of this blog series, I will comment on the VIX.

As seen below, if one looks casually at the VIX daily chart, there doesn’t seem to be much to be concerned about:

VIX daily 1-year chart

Chart Courtesy of StockCharts.com

However, I would like to make a couple of observations. First, as one can see, the rate of decline appears to be slowing. Second, as one can see on the 10-year chart below, the level of 20 (as seen by the blue horizontal line) on the VIX seems to be a good demarcation of stress. Not only is the VIX still above 20, but it has been above that level continuously since early September of last year. I think this is signficant:

VIX 10-year daily chart

Chart Courtesy of StockCharts.com

Tommorrow I will summarize my thoughts on this series of blog posts, and indicate where I believe we are heading in the markets. As I stated in the first post of this blog series, I believe we are at a very critical juncture here in the markets.

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SPX at 1055.65 as this post is written