Monday, April 12, 2010

VIX plumbs new low as other indicators edge closer to extremes

The volatility index ($VIX) dropped to another new low on its series of waves down since late 2008/early 2009, meaning that investors shed yet more fear to place yet less value on premium protecting against volatility. I could almost draw a new down trendline that price almost touched today. Below the VIX daily is a VIX weekly chart that also shows this substantial drop. This places it at risk of a snapback along with a stock market pullback. At the same time, other indicators (shown lower down) also tell the story of the market at the edge of cresting.

And here's the SentimenTrader gauge from - evidently there's some wave cresting for the bigger picture whether or not the near term is hot enough to set up a correction now:


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But we can see that the CPCE (put/call ratio) is at a very low level that typically tells traders to expect a sell-off soon. And the TRIN is at relatively overbought levels:

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