friday wannabes, page-31

You know what an upside down mortgage is ... that's when the value of someone's home drops lower than the outstanding mortgage. What that happens, there is a negative disparity.

Right now, we have a negative disparity between the VIX (Volatility Index) and the S&P 500. The VIX and the market normally move opposite to each other. When the VIX (fear levels) move down, investors buy more and the market moves up. When the VIX moves up, fear levels are increasing so the market moves down.

When you look at today's chart, you will see that the opposite is happening right now. We have a negative disparity because the VIX is moving up AND the S&P 500 is moving up at the same time.

Take a look at today's chart below, and you will see this disparity. First, look at the S&P and you will see that its fan lines are rising. The S&P has been making higher tops and higher bottoms on its 60 minute chart.

But, at the same time, the VIX has rising fan lines with higher tops and higher bottoms. The S&P and the VIX are both trending in the same direction.

What does this mean? It means that as some larger investors are buying in anticipation of a rate cut by Bernanke next week, many broader market investors are still fearful about sub-prime problems. At the same time, foreign investors are worried that an interest rate cut will send the Dollar down further taking the profits out of investments they have in American securities. The actions of these players are offsetting each in a stalemate right now.

Sound's like a Mexican standoff. Wikipedia says that "the asymmetrical nature of a Mexican standoff means that - in the event of conflict - each party will face a tactical decision as to which other party to strike first."

That tactical decision point will arrive next week when Bernanke makes his interest rate announcement.