Lame Duck Tuesday, page-2

Well, that wasn’t much fun today.

XJO down -1.56%


Most of the past three days upside has been erased, but the recent pivot low hasn’t been broken. We need to break below the pivot low of 31 January to establish that.

XJO finished at 6026.2. Pivot low of 31 January was at 5993.6.

The Australian market was in the grip of extreme fear today. I have some indicators which were way above anything seen in the past 12 months.

Fear was so extreme – it’s likely we’ll see a bounce tomorrow or the next day.

The usual measure of “fear” is the Volatility Index (A.VIX). That’s high but not a one year high.

I’ve developed a better indicator of extreme fear. It rarely shows its hand but it has today.

When extreme fear hits the market everything, the bath water, the baby and the kitchen sink get thrown out the window.

I’ve measured that by the chart of the Ratio of UnchangedStocks/Total.

Under normal conditions, there are a lot of unchanged stocks in the market. Situation normal. When extreme fear hits the market, everything (more or less) gets sold off.

Here’s the chart for that ratio:



Punters were selling “everything” (more or less). It didn’t matter whether it was good, bad or otherwise. Out it went.

Under those conditions, the “smart money” is scooping up.

That doesn’t mean we’ll be up tomorrow (but we could be), but the bottom is not far off. Who’s left to sell?