Missouri Market

On Friday, the Nasdaq opened slightly higher and rallied.
Then, after some mid-day drifting, it resumed its rally. Finally, it give up
some ground late in the day but still managed to close well—taking a snapshot
of the 4:00 PM EST close. At the time this was being written, there appears to
be some confusion about where the Nasdaq should be “closed.” This is
based on the exchange extending trading hours due to late-day glitches.

Friday’s action puts the index above the 50-day moving
average–even with the later day “close.”

 

The S&P didn’t do quite as
well as the Naz. It appears that with the extended day quotes from the OTC
stocks, it will end the day in the negative column (vs. the positive 4:00PM
chart shown below). The top of the recent range, circa 1240 resistance continues
to hold. This keeps the range between 1200 and 1240.  Again, a break above
would be, to quote Martha, “a good thing
.
A break below would have my friend in Chicago happy.

 

The VIX probed to levels not
seen since September of 2000.

 

The NDX VIX (a.k.a. the VXN) also dropped to new lows.

 

So what do we do? First, the fiasco at the Nasdaq at the
end of the last day of the quarter, is to misquote Martha, “not a good
thing.” Markets do not like uncertainty. And, neither do large
institutions. I’d love to be a fly on the wall on some of these trading desks. I
can only imagine the colorful language being thrown around. Second, I’m
concerned about the low VIX readings (see below). Therefore, I’m going to
pretend I’m from Missouri and take more of a “show me” approach
towards these markets.  

Looking to potential setups, once again, as I tool through
hundreds of charts, I see a lot more stocks set up on the short side than the
long. 

Blockbuster Entertainment (BBI),
mentioned Thursday night, still looks poised to break down out of an inverted
cup and handle (and quasi Bow Tie). 

Northrop Grumman (NOC)
looks poised to resume its strong downtrend out of a pullback from lows.

To VIX or Not To VIX?

It seems that every time the
VIX reaches new lows, many begin to discount it–some, with very intelligent and
compelling arguments. I remember preaching about the low VIX readings in late
August of 2000(a). I also received some compelling arguments (and a few nasty
emails) back then too. I’ll let the charts speak for themselves.

Is it a perfect indicator? No.
It can often diverge and have long lead/lag times. It should be taken into
context with other market indicators/statistics and most importantly, price
action. Is it different this time? Maybe, but until proven otherwise, I’m going
to stay concerned. 

Best of luck with your trading
on Monday!

Dave Landry

sentivetradingco@prodigy.net

P.S. Reminder: Protective stops on every trade!

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book is organized, concise and well documented in your charts. It is an easy
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