O que significaria o bloqueio do Estreito de Ormuz?

[Camisa Roxa]

WEDNESDAY a.m.
January 15, 2003



A Well-Worn Path
by David Nichols

Yesterday the Volatility Index (VIX) made a real try at breaking down below the 26 range. The low close on the VIX on a 30 minute chart over the last weeks has been 26.19. During the last half-hour yesterday -- ahead of Intel's report, interestingly -- the VIX made a run for that level.



While it ended up shy of that mark, it told us that investors were not nervous ahead of the big earnings reports coming up -- and the market has a predisposition to go up right here.

The markets are fully congested, and ready for a big move. Generally speaking, the longer the duration of a sideways, congestion period, the streakier the chaos that follows. It looks like the chaotic energy should be released to the upside, and we're going to get that exhaustive move up to the neckline. Even though the last few sessions have been utterly forgettable, there were actually subtle whispers from the market, saying "we're not afraid of earnings...."

Let me show again some trendlines through the middle of the daily uptrends. A strong move to the upside should have the strength to reach the underside of the line drawn up the middle of the recent move off the October bottom.





This is an ideal scenario, I think, for trading. It should be possible to scalp some winners to the upside over the near-term, but the real trade will be to the downside, once the remaining buying energy is used up, and resistance levels are in sight. At that point, our sentiment tank should be drained down close to empty, and that's when we'll want to pile into leveraged bearish Rydex funds.

If I draw the same line down the middle of the trend on the VIX, it gives a target in the low 20s.



We've all been down this road before, many times in the bear market. This set-up is a well-worn path, and we know the route. Once the VIX hits the low 20s, investors are feeling supremely confident about the future. This strength is infectious, and it's easy to believe that the worst is over. Yet if the markets haven't been able to make any true upside progress in price while this bullish euphoria is building -- and we haven't -- then this euphoria is setting up the markets for a downside cascade.

Now here's the rub: if the markets are able to continue to rally as I've outlined, when it comes time to pull the trigger on the downside trade -- right at the point of exhaustion -- you're not going to want to do it. That's the way it works. Indeed, that's the way it should work . The best trades feel horribly wrong when it's time to do them.

I just hope we get the chance, and the markets don't instead continue to waffle around in these middle ranges of sentiment. The current market has been the type that doesn't offer ideal risk/reward set-ups for Rydex trading, at least in my opinion.