TED collapsed below 15 (from a recent high of 48.63 on 6/14/2010). There are no bank/credit fears priced in the lending market right now. Place your watch for a touch/break above 17.
The fear barometer is holding a range since July, but ignoring the volatility in flashcrash May, the range goes back to 4/28/2010. The upper and lower averages are decreasing. Currently, we are at the high of the 2 month channel. Short term says this uptrend may be contested, since the spreads are becoming relatively expensive. A swing down from 23.81 to 21 appears probable in a two week timeframe.
A move down paired with a lower SPY would continue to confirm a trading range. A test of SPY 110.50 is highly probable, given the decreasing impulse of the September rally.
A move down in the fear barometer with a higher swing low and breakout higher formed on the SPY implies an uptrend may be forming. Reasoning: the spread is pricing in the uptrend, and relaxed fear levels.
Coincidentally, a break above 24 with a higher SPY implies increasing fear of heights. This does not indicate the uptrend will stop, just the dominant trend's end will be swift and fast. A higher swing bottom and breakout of the fear barometer will help identify the market direction.
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