The ABC 7.00 p.m. news tonight led with the story about the carnage on the Australian stock market. That report continued for about another ten minutes.
Such media coverage is often a clue that the pull-back is over.
So, let’s have a look at a few charts.
XJO today:
Today’s fall doesn’t come much bigger, -3.2%. The chart is now to horizontal support and a bit below the 200-Day MA. That looks like a logical support level to me. After such a big down day – I’d expect some move back to the upside.
Next, let’s have a look at my “fear” index. Ratio of traded but unchanged stocks to total traded:
That plumbed new depths today. Back in the good old days pre-2007, if the total number of unchanged but traded stocks was below 300 – that was a good sign of a “low”. The number of stocks unchanged but traded came in today at 241. So that’s within the ball park.
The next chart is a more abstruse chart (if that is possible). It shows the percent variation between historical and implied volatility (VIX). It tends to be a leading indicator.
It shows a shows a sharp rise from early January predicting the increased volatility we are seeing today. It is now showing a drop off.
This is still early days and one day’s drop doesn’t necessarily mean a lot – but it may be indicative.
OK. Time for me to go out on a limb. If today’s low does not precede a bounce, I’m a monkey’s uncle.
Of course, it could be a dead-cat bounce. We will see.
(20min delay)