If you've been trading the approximate 150 point range in the S&P 500, then you've done ok, but that trade is getting a little crowded.
$VIX
Volatility Index
If you're reading this blog then you already know that the selling over the past week has been relentless. Just this week the market indices lost 15% (NASDAQ) to 20% (NYSE) of their value.
Last week I said we were still on hold and looking for our sentiment indicators, the VIX and Put/Call Ratio, to tell us that a bottom is likely in. These indicators hit those extreme levels we've been waiting for. The VIX spiked well above 30--peaking above 40 and surpassing spikes made earlier in the year.
If you were looking for a good entry for a new short position this past week, you missed the boat. Instead of a reflex bounce after last Friday's sell off (with the possible exception of the Dow), investors came back to the market on Monday ready to dump more shares. The selling pushed the indices even closer to their March lows. The NASDAQ Composite finally broke below its 50 day moving average (DMA), the last of our indices to do so, before popping back above it today.
In this inaugural installment of what I intend to be a weekly look at the price action of the market indices, let me begin by outlining my process.
Daily and weekly I review the action of the major market indices--the NASDAQ Composite, the NYSE Composite, the S&P 500, and the Dow Jones Industrial Average--to stay abreast of the current market trend. I try to identify which indices are leading the market, areas of technical support or resistance which may influence their movement, and the general tone of the market.
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