Wednesday, March 14, 2007

Wednesday of Options X -- The Low we put in Today, was that the Bottom you were looking for?

Wednesday of Options X -- The Low we put in Today, was that the Bottom you were looking for?SocialTwist Tell-a-Friend
Fari Hamzei

Not exactly !!

I was asked that question a number of times earlier today, both by professional and institutional traders.

IMHO, the market is following the Script we put out two Sundays ago on this blog (see http://hamzeianalytics.blogspot.com/2007/03/market-timing.html).

Our Script calls for a volalitity retest in the +4 to +5 sigma region. That should translate to a test of our last May 2006 high (~1326 on SPX), now acting as a critical Support. If that support level does not hold, the next logical stop is 1280 on SPX (July 2006 highs).

Here are two Volatility Indices that we follow very closely. (I am in the Prof. Robert Whaely's camp (the orginal VIX inventor), now called VXO -- and yes, I don't like the new VIX, as it has to do with its construct).


During this vol retest, we should see the VXO between the high 20s to low 30s, and




We should see VXN in the mid 30s before the dust settles. As far as its timing, with this week's quad-witching March Expiry as a backdrop, market should sell thru Friday and Monday ahead of Tuesday which happens to be Vernal Equinox (First Day of the Spring or "Norouz" in Persian).

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