Morning Audibles 4.7.10 - Some Crappy 2 Bit TA

About 90% of what I've been reading lately are articles and comments which try to underline, (or 'debunk') the notion that the market seems OVERBOUGHT at the moment. Half say equities are due for some kind of correction, the other half say we're 'in the clear' (as many of the REASONS for it to possibly go down - from technical barriers, to EW patterns, to OPEXpirations, to bond sales, to Greek defaults - don't seem to be having any effect on the ARMOR of the indices). 


I've decided to look at the situation from a simpler view (note: there are SOME annotations on the charts, but a lot of my comments you can just read here). 

VIX DAILY - Since the March '09 lows, when the DAILY VIX has pierced it's DAILY bollinger bands, it's tended to lead to 'minor' corrections (mostly UNDER 5%, and more often than not, smaller than that, generally in the 2-3% range). We've also been discussing the 16 level on the VIX (which served as the level in October '07, and in May '08), something to keep in mind as the VIX hit 16.23 yesterday.

VIX WEEKLY - More interesting to me is how the VIX has behaved when it has pierced the lower bollingers on a WEEKLY chart. This is indeed a rare occurrence. Most recently it did that in January '10. Usually this is a signal that a DEEPER correction is coming (in the 10% range). What's interesting most recently though, is that the lower bollingers have stretched all the way down to the "14" handle. So for this to occur, we'd either need some shock to the system to occur, or, as bulls may have it, we may just find ourselves at ZERO soon and the DOW would just continue to chug along to 36,000 about the rate of a half a percent per day.

SPX - I then decided to take a look at TIMESCALES (since the March '09 low). The boxes you see annotated are the number of days [trough to peak], in the rallies we've experienced. The first rally I counted from the EOQ '09 (instead of the actual low) because it actually did represent a "correction low. Note that all of the rallies have thus far been very close to the FIBONACCI number of 55. Interestingly, the duration of the all of the "corrections" from these boxes were EXACT fibonacci numbers (21, 8, & 13 respectively). I did take a little creative license in saying that the MIDDLE BOX actually finished in September of '09, then took a little dip and resumed. However, the eventual EXTENSION did finish with the same design.


The reason I point that out is that we may be in front of the same type of phenomenon here. We are 41 days into the most recent rally... 55 days, from here, seems like an "eternity" when one considers how technically overbought the markets may seem in this moment. Half the people are calling for us to "complete" a move to 1200, or the 1220's. The other half CAN'T BEAR to endure another 13 trading days of drudgery (if the case is to be made to make ANOTHER sequential 51-55 box as I've illustrated on the chart).


Anyway, you decide. But CV is always thinking of ways to keep his sanity. My ideas and 10 cents will get you a cup of coffee (assuming you don't spill the beans all over the floor). 

& if you're thinking... "CV, you CANNOT get a "caramel macchiato" from Starbucks for 10 cents"... Oh contraire! Here's the "do it at home" version:



Ingredients
6 ounces coffee (brewed)
6 ounces milk (steamed)
1-2 teaspoon sugar or Splenda sugar substitute (to taste)
3 teaspoons caramel syrup
1/2 teaspoon artificial vanilla flavoring
reddi whipped cream
caramel syrup, drizzled

Directions
- To make a strong coffee, you can brew a ratio of 3 heaping tbsp of coffee to 6 cups water.
- Add vanillia to the coffee grinds before making the coffee, that way it will infuse while brewing.
- Once coffee is done brewing, place milk in a large cup and microwave until hot.
- In a tall glass combine the coffee, milk, and caramel syrup and stir well.
- Add sugar in small increments until desired sweetness is achieved, don't forget that the caramel will sweeten this beverage as well.
- Top with whipped cream and drizzle caramel.

If you need me to teach you how to make caramel syrup, that's the NEXT lesson