CALDEIRÃO DE BOLSA

Excelente, obrigado, camisa roxa!

Agora só falta o eagle vir fazer o apanhado da perspectiva dele!

Não consigo anexar documentos word, por isso vai sem gráficos:


MONDAY a.m.
December 2, 2002



by David Nichols

It's hard to argue with the weekly chart of the S&P 100 (OEX). Last week marked the eighth straight week that it has gone up.



It's also interesting to note that on a weekly basis, this current rally has surpassed the August rally. The OEX is now coming up quickly on the critical 40 week moving average, which corresponds closely to the widely-followed 200 day moving average.

It's an uptrend, plain and simple. But as I've mentioned, on an anecdotal level I've never seen a trend so sniped at by traders. The bears are stubborn here, and have dug in to ride out this uptrend. This only helps to fuel further upside, much to their distress.

Now in addition to anecdotal evidence, we have actual evidence from the VIX that the uptrend is being fought. Last Wednesday, while the price of the OEX was shooting up, the VIX was also rising strongly. This isn't the way it generally works. When prices soar, the VIX usually tumbles down.

So what's going on? It's likely an anomaly due to thin Holiday trading, but it does give us some insight. Remember, the VIX reflects the price in the options pit for OEX calls and puts -- it's a true gauge of supply and demand.



A rising VIX means the demand for options is high, and the market makers are able to raise the price of options into this demand. This is exactly what happened on Wednesday. Somebody was buying options, creating a surge of demand. I've read some reports from the pit that a big short was hedging a position in a rush by buying calls, and the market makers were feasting on this unfortunate soul, inflating the prices of options into this outsized demand.

Ironically this hedge may end up being very smart, even if the premium was inflated. This uptrend isn't over by any means.

In fact, with this jump in the VIX, there is now more "fuel in the tank" to support another push higher. This can be seen clearly in our new sentiment dashboard.



Both the mid-term and the long-term trends remain up, with good confidence numbers in each time-frame. The number 4 on each gauge indicates our confidence in the trend reading. The current reading is 4 out of a possible 7. I've had questions about why we didn't use 10 for this, as this would make it more intuitive. The answer is actually pretty simple -- we are looking at 7 different indicators, and adding a point to this "confidence diffusion index" if the indicator currently supports the trend.

Just so you know, I regard a reading of 4 as strong affirmation of the trend. 2 or below would be time to show caution.

One thing about the VIX right now is it is very, very widely followed. It has been so accurate at predicting the swings in the market over the last 2 1/2 years that now it is the go-to indicator for many traders.

But the tricky thing about the VIX is it doesn't always work the same, and a cookie-cutter approach to its interpretation can lose you lots of money. You have to be careful, and not make too many assumptions or intricate interpretations.

The VIX is now at 31.08, and this uptrend really won't be running on vapors until the VIX plunges into the low 20s. We should see the VIX go under 25, and stay there for a little while, before this rally has fully exhausted itself.

I've mentioned recently that this is the type of breakout that typically ends in exhaustion, and not in total collapse. Also, it's important to keep in mind that often the biggest part of a trend comes at the very end. This is why I've wanted to stay in there on this uptrend as long as possible, as there could still be big jumps up in price before we reach the exhaustion point.