But first let's take a look at SPX and OBV.
What we find, is that "Smart Money" is not SELLING.
I they were, how come bottoms have refused to decline since May 2007?
Waht about worries?
It seems the trend for worries was broken last week.
Even the most generous trendline was broken
Does it matter?
Well, looking at VIX in anther way, we find that you can even analyze VIX that old way which nobody does anymore (since we have stockcharts.com with zillions of indcators)
In this chart we find a Double top (Red markings) or a complex H&S pattern if you want.
In the right hand top there is H&S pattern with a neckline that is parallell with the red line (confirmation of the validity of the line)
Now look what happens after breaks of the lines - both times vix dutifully moves up and confirms the break. First time with a break away gap.
But here comes an interesting thing, (remember the OBV issue above).
What we see down here is SPX - VIX, represented by three MA (200/50/20) and finally a moving average oscillator as an histogram with 200 MA as baseline and 20MA moving around it.
What we see (represented by the 20MA) is that the tops are moving higher and higher, (greater and greater fear with every increasing top) more and more fear,
BUT - not at the last bottom (in price). People are getting used to bad news.
That's what we se in absolute figures, but look at what happens if we consider the trend (in fear).
We see that in the oscillator - then (as can be expected - by the surprise factor) fear is greatest at first panic. And declining with every panic and finally 20MA is breaking 200MA.
Now look at what happend last time 20MA broke 200MA
That was in August 2006.
And what happend after that?
Hmmmmmmm......
Is it a coincidence?
Well, the patterns look the same don't they?
Two bottoms in what could be described as inverse H&S pattern.
If you measure time from the first bottom "1" to the 200/20 MA break, it was 57 TD in 2006 and 61 days in 2008.
Considering that 60 is a very importantnumber cycle wise, I would not ignore that fact.
And finally if we consider that FED lowered interest to dampen FEAR.
What does it mean that we broke over an inverse H&S pattern last week.
Well, your guess is as good as mine.
So putting the pieces together.
Smart money has NOT been selling. (So if you want to buy - you have pay!)
Fear is not in the market any more (and not yet greed)
Lot's of people on the sidelines
Probably massive shorts waiting to cover .
DAX broke out friday in an impressive break away gap last friday. (FTSE today -Sweden Friday)
Closed the gap today and moved on ............. UP
I think we are looking for some very interesting weeks ahead.
Attached Thumbnails
Edited by Stickan, 28 April 2008 - 07:13 AM.
