Thursday, June 15, 2006

Back Above 11K

And they come roaring back just as the bulls were about to give up.  Now, those bulls can rest easy again with the Dow back above 11,000.  We think that the complacency will set in fairly quickly and the volatility index was definitely showing that during the day as it dropped 25%.  We haven’t talked much about the VIX because there hasn’t been much to tell.  With the market trading down in the last few weeks, the fear factor did rise a bit moving the VIX up from around 12 to the low 20’s.  For Thursday, the VIX dropped from about 21 to about 15.5 indicating a big collapse in fear.

In yesterday’s post, we mentioned that the broader market would probably participate in the rally on Thursday and that happened, probably even more than we expected.  This is the kind of rally that is bound to occur in a bear market, violent and sudden.  

I think the key learning for these last few weeks is that the Media doesn’t always understand the why’s of the market.  As we mentioned yesterday, they were having a difficult time aligning the news with the trading.  This is where we need to be paying attention to the market, not the media.

The problem is that for most non-traders, this rally was tough to play.  You want to sit on your position on the main trend.  The market is now a very tough place to be playing anyway.  We would suggest that the path of the market is down even after a day like Thursday, even though the euphoria of the move kind of masking any bearishness whatsoever.  Make no mistake, the bear is back and right now is allowing a bit of an upward correction to give confidence to the bulls and fear to the bears.  

We will watch for another good point to sell into, but that may be tomorrow so…

Be careful out there…  

Dow Industrials:  11,015.19  +198.27
RYVNX:   21.59
RYAIX:  23.86
TLT:  84.50
BEGBX:  13.39

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