Saturday, November 10, 2012

Stock Market and the Media

One of the things that bothers me is the overwhelming amount of media that suggests bearish moves are over or that the stock market has hit a bottom.  This morning I came across this article on CNBC's website: It's title is: "Did the S&P Bottom Thursday? Yes, says the VIX" It lays out some obscure pattern that supports their assertion.  This is my problem with the article.  First the VIX is only at 18.61 and has not breached 20 at any time during this last down turn suggesting that the selling has been orderly; which means its likely to continue. You typically need some sort of capitulation type move in the market with a VIX spike to signal a bottom.  During our last selloff in June 2012 for example the VIX nearly hit 28.  Second the stock market is effectively sitting on a 13 month support line that originated in October 2011.  This is our fourth touch which generally would be supportive if we were to bounce off of it.  It's too early to tell and would never feel comfortable calling a bottom at the very bottom.  That just does not happen.  Finally there are a number of other longer term technical indicators that suggest this move down is far from over.  With some indicators pointing to a move that could last for months.  This is one of the reasons that I never give myself price targets (aside from resistance and support levels) I tend to follow what the indicators tell me and the visability with these is typically not more than a few days

No comments:

Post a Comment