As the Equities continue its march higher to important resistance or surpassing its previous high, VIX the fear gauge continue to plunge to lower level noted back in 2007. It is quite Volatile but the general trend is to the down side as it will likely continue to form lower lows and lower highs. Higher Equities normally accompanies weaker Dollar, where most Dollar denominated Currencies (EURUSD in particular) and other Financial Assets will gain in varying degree. This supports my longer term view over next several months higher Equites & EURUSD. Check out my EURUSD chart long term bullish published about a week & ago.
Comments
DanV
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In addition to the above I strongly suggest you check out the Dollar Index chart for comparing the longer term view. tradingview.com/v/SZDm2FmO/ and Dow Ind & Dow transport comparison chart tradingview.com/v/NhLkVXOL/
QuantitativeExhaustion
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Anything below 12 but not lower than 10.5, and S&P will correct in March. Anthing below 8.70 and S&P will more than correct, probably bear market condition 20%+ drop later this year.
A sub 9 VIX means U.S. markets will rejoice in the short-intermediary time frame, next 6 to 8 months, because the government chose to kick the can without cutting defecit speding. Therefore credit rating agencies, Moody's and Fitch will downgrade U.S. debt in the third quarter of 2013 or earlier, while S&P rating may go for more.
I do not think people really have grasped the magnitude of developed countries debt situation and there solution to monetize the debt. Inflation with government debt induced growth (repaid with higher taxes) destroys the wealth and future earnings of the middle class.
Law of Diminishing Return (Developed Countries GDP Growth 1880 to 2000 compared to 2000 to 2080) = a return to Equilibrium (negative real growth adjusted for Developed Countries liablities, government and consumer)
DanV
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I agree with your comments. My Equity chart seems to suggest that late 2013 to early 2014 we will see new high in Dow and some of the other index which will then set the scene for major top to be in place and over a decade of bear market till all this Debt situation is washed out of the system mainly by defaults on the part of many. During this regardless of the new money being pumped into the economy, Major inflation is unlikely to take effect as lot of this money is being destroyed in default. I hope to get in position to trade these big longer term plays.
QuantitativeExhaustion
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Well, timing this all depends on how the U.S. government handles the debt situation in March. If they act agressive, allow the sequesters to go through, market will correct 10 - 20% starting in March.
IF U.S. decides to kick the can once again, Markets will hit new highs this summer, Silver will top out over 80 later this year. Commodities will eventually kill all growth and in late 2013/early 2014, as you point out, the world markets will decline.
paulyberndt
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Will be interesting for me to see if they can poke it through the 1490 level on the SPX. I published a chart on a monthly with a Schiff pitchfork using the 2003 low of my starting point. Pitchforks are about 80% accurate so I am watching that level closely.
90 Days from the November 16 low will be FEB 14 which is a possible turn date. 45 Days from Nov 16 was DEC 31 so Gann nailed it there. Will see how it plays out in FEB. I enjoy your charts.
paulyberndt
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There is about a 2.5 skew on the March puts in the SPX so options players are expecting higher vols going into March. The market internals are at extremes now with well over 80% of stocks in the NYSE over the 200 day SMA. That means they are buying alot of junky stocks too. What news event triggers profit taking who knows. Institutions have not shown us their hands yet and let smaller traders probe stops as it grinds higher.
DanV
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I agree with your observation, and I do expect a pull back in a week or 2, as the VIX probes low, it will then snap back up, but over intermediate term it will continue with it's lower lows and lower high sequences. So later this year or by early 2014 I expect that the equities will have established Major Top that would not be surpassed many year and from which we will trend lower for decade or more. But over the next 12 months or so I am looking for gradual grinding higher of Equities & Dollar possible establish new low before trend change.