TRYING TO FIND A BOTTOM – Charts and technical commentary by David Chapman

This past week was one of the wildest in our memory. The VIX indicator, a measure of fear and greed and volatility in the market, went above 80 before reversing and closing over 10 points lower. The VIX trades inversely to the stock market (S&P 500). This was a record level for the current version of the VIX indicator, although it only goes back to 1990. As we have noted before, the VIX this time around took out the highs seen at the 1997 Asian financial panic, the 1998 Asian/Russian and Long Term Capital Management (LTCM) panic, the 2001 September 11 attacks and the 2002 tech wreck/dot-com bust.

Some have noted that based on the old formula for the VIX, the past weeks high was around 100. That is the highest since the 1987 stock market crash where the VIX hit a record one-day high of 122. This crash occurred over a two-week period but nonetheless the impact was the same. As well this crash got underway after the market was already down roughly 20 per cent. In the period following the highs seen on September 19, 2008 the S&P 500 fell another 30 per cent to the lows on October 10, 2008.

TSX INDICES
After collapsing some 16 per cent the previous week the TSX Composite after making new lows for the move down reversed and closed up on the week by 5.5 per cent. No it wasn’t a huge outside week signaling a possible key reversal week but nonetheless it does qualify as a reversal week.

Leading the way was the Financials index with a 10.8 per cent gain. But right on their tale also with an up week above 10 per cent was Utilities up 10.7 per cent and Energy up 10.1 per cent. But not all sectors joined the reversal party. The Gold Index was hammered down 14.5 per cent while Materials also saw an 11.1 per cent drop. They also saw new lows for the move down as did the TSX Composite of course, the TSX 60 Composite. The CDNX Venture exchange also recorded new lows for the move as that group cannot seem to get anything going.

TSX COMPOSITE STOCKS BUYS AND SELLS
In the devastation of the stock market buys are few while sells are many. TF.UN below is the subject of a takeover at $11 so Friday’s close price $10.50 leaves little. Sectors seem to be primarily consumer staples. Almost any and every sector is showing avoid as are many stocks. RGL fell off the list for gold buys but it is still a hold. FFH benefited from positions in Credit Default Swaps (CDS’s) where it is was positively [ read more... ]

Subscribe to David’s reports and read more about:

• Market trying to make a bottom
• VIX at record highs
• Sentiment indicators say bears are overwhelming bulls. Is there a bull anywhere?
• The financial industry will undergo a major shakeout in employment over the next year
• Many hedge funds are out of business and many more will fail
• Fed printing money at an unprecedented pace. Monetary base explodes.
• Bonds topping. Get out of bonds.
• Gold (and silver) on their knees
• A new Bretton Woods is now going mainstream

Click here to subscribe today!