Unfortunately, the range created by yesterday's exploits provides for possibly further 2% swings in the market. This is already apparent in the overnight ES-mini futures 10 to 11 point price gyrations between 1022 and 1034.
If acceptance kicks in while we are down-trending, expect a test of the recent low. If acceptance arrives when it shows life of an uptrend, then yesterday's low will be a significant resistance point.
My TED Spread commentary holds: "If the other shoe to drop coincides with a break down of the TED spread, expect that climax-sell day's low may become a support point." My context was for the market to 'climax' over the next couple of weeks, not that same day.
My comment from yesterday regarding the Fear Barometer holds: "A break in the Fear Barometer's pattern may indicate a reversal to long or start of a short term ranged market forming."
On 5/6/2010, the fear barometer went lower from 22.62 to 20.85, touching the lower support of the fear channel. The longer term pattern shows an elliptical increase in the cost to protect a position with an option collar, if yesterday's close of the fear barometer holds. So, it may become unfashionable to hold Puts, in case a volatility crush occurs. I would expect this if the fear barometer breaks yesterday's low of 20.85 significantly. This would say the option writers are comfortable with the short term market activity.
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