Volatility

Not very nice on the market. After FED rate cut the market crushed, then almost recovered and moved down again. It looks like the indexes are tending to reach the December 4, lows. The short-term technical indicators are not good for recovery, they are more bearish now, by indicating the possibility of the further slide. The volatility started to grow again and it’s not a very good sign.

The market changes very quickly lately and it’s possible that tomorrow the short-term indicators could be completely opposite.



The mid-term indicators are mixed. Some of them started to become bearish. Even I have not seen indication about beginning of the mid-term downtrend the S&P 500 dropped almost 3%. Yes, I expected the correction within the dominant mid-term up-trend, however, very often a correction down generates logical question “Is this a beginning of the new bear market???” So far looking at my charts I may say that I did not see the reasons for a strong move down and I would still expect to see the recovery with continuation of the bull market. Yet, I could be wrong…

As I already mentioned above, the market is become volatile lately and changes it’s mood very fast. The next week is a triple expiration week that could bring additional volatility into the market.

What make me cautious is that when I look at the chart over the last half of year I see strong and sharp downswing and quick recovery rally. It has become custom when the S&P 500 may loose 2-3% over a session and then gain it back in a single session as well. We have not seen such sharp and strong moves. Over the last 6 months we had 8 instances when the DJI dropped for more then 2% and 5 instances when it recovered by more then 2% in a single session. The last time we have seen such strong moves in the period from June 2002 until May 2003. Take a look at chart - it makes to think…. Aren’t we close to something….