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Sky Seems Clear

Published on March 14, 2012

Sky Seems Clear

March 14, 2012

What a powerful reversal/follow-through for the US markets especially within a week of a 90% down day!  Yesterday was a 90% up volume day when a powerful rally in S&P500 was joined by Dow Industrial (DJI), Dow Transports (DJT), Russell 2000 (RUT) and Nasdaq-100 (NDX). Nasdaq cleared 3,000 level for the first time ever since Mar 2000 top. The rally was supported by over 5% drop in VIX cash index (VIX), VIX futures, rise in yield across the board, above average volume and also CBOE 3 month volatility dropped by roughly 6%. There were 4.4 advancing issue on NYSE for every declining issue.

CBOE VIX Skew index (SKEW) dropped by 13%, 2nd consecutive day of more than 10% move. The volatility based indicator already gave a buy signal that I shared  before markets opened yesterday. Though divergences are still present in various market internals, during the past few days most of the market internal indicators are moving in tandem with the price action.

Bottom-line–  As I mentioned in my late Feb post that if S&P can stay above 1376-1382 area, my bias will switch from bearish to bullish (while still being partially hedged). After this technical breakout yesterday, it seems clear that there is room to go up to 1450/1460 without much of trouble. As a trader, always keep an eye for any breakdowns though, especially for any close below 1370-1376 for S&P500.

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Profitable Trading, OP

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