Ao minuto: Praças europeias respiram de alívio, indiferentes a possível violação de cessar-fogo

[Figas]

THURSDAY a.m.
July 24, 2003



Drifter
by David Nichols

The market didn't do a whole lot of anything yesterday, as the market hits the drifty summer doldrums. In sailing parlance, it was a "drifter". It drifted down, and drifted up.

Last year at this time we had tumultuous summer squalls, but that's the exception rather than the rule. The current drifty action is much more typical of late July and August than last year's tempests.

There's really not too much to talk about in equities. Stocks aren't going up, and they're not going down either.

But one thing that seems to be happening is the market is finally lulling everyone into a complacent torpor. It's held up for so many weeks now without really falling back that there's almost nobody left to believe in a coming decline. Yesterday the Volatility Index (VIX) broke down below its recent tight range, hitting a new closing low for the year.



Such an event on the VIX should be associated with a breakout to higher prices. The implied bullishness in such a VIX drop should be happening for a reason. But that wasn't the case yesterday. Indeed, this latest advance phase for the market -- as measured by the short-term momentum of sentiment -- has so far been a dud.



This is a subtle clue that the market is really out of gas this time. The VIX has dumped from 23.47 to 20.44 -- a drop of 3 full points, or about 13% -- and the SPX has only managed to rise from 980 to 988, which is .008%. That's really, really bad "mileage per point" from the VIX, if you consider it as sentiment fuel for the market.

The advance phases so far in this uptrend have been much stronger that this current one. Such a dramatic relative weakening at this point is strongly associated with a market making an important top. As I talked about yesterday, if the VIX continues to plunge further from here -- especially if it gets down into the teens -- yet the market struggles to inch its way higher -- ideally staying below SPX 1000 -- then that's the time to finally bet against this uptrend in a bigger way.

Some more aggressive speculative put positions or shorts will be indicated at that point, especially as my fractal dimension trend/congestion indicators are all juiced up and ready for big moves in nearly every time-frame. In our more aggressive services, we'll be looking to do some longer-term options and single-stock futures positions as the next short-term decline phase is triggered.

Sentiment Dashboard
by Adam Oliensis



SENTIMENT TANK: Drained 3 points to 4% full of negative sentiment. While the VIX hit a new closing low the 20-dma of the Put/Call Ratio is at a cautious 0.80. That high P/C Ratio has probably helped to keep the market afloat as it has kept the sentiment tank from hitting and sticking to ZERO.

SHORT-TERM: Tuesday's advance phase sustained through Wednesday as the VIX barely dropped through its recent floor.

MID-TERM: Progressed a meager 1 point to 40% in its decline phase but the gauge has a zero confidence level. There just isn't much momentum of sentiment to measure.

LONG-TERM: Sticking at a neutral 95/5 with no momentum here either. Weekly CDI is at 0 just like the daily.

BOTTOM LINE: The extreme sanguinity expressed by the VIX is coming with the SPX's testing SUPPORT! That's wacky. The "What, me worry?" attitude is worthy of Mad Magazine. Price is hanging its naked behind over the precipice. Yet there is no urgency to the market's wish to insure itself against falling off. (The precipice is SPX 972.). That lack of urgency expresses at least some level of denial about the probability and severity of the risks. That kind of denial is dangerous for the market.

Given the depth and breadth of the denial it may take a penetration of the 950-972 band on the SPX to raise much negative sentiment.