The VIX is breaking down bad today. The market has at least so far intra day rejected the bearish case. I am seeing enough signs now that this decline has extinguished itself.
The market should have been down 500 points by now and should be down 600 by the close today. It is not looking like the day will end that way. Because of this I have to assume the opposite will occur.
Again, the market had the opportunity to take the bearish option today but it is dramatically rejecting it.
There is another important point that I have failed to point out in the past and that has to do with the volume structure on the SPY on the recent retesting action of the market.
The MEGA volume was on August 9, 2011, then we had a retest in mid August on much less volume. Then recently one day ago we had another down move on even lighter volume. This is the same type of action that ENDED the bearish action in 2010 !!!!
I know I get a lot of criticism for changing my mind so much on this blog but I have to make the call as I see it and as the market changes. The alternative is for me to ‘hang on’ and be slow to change opinion while the market goes up 1000 points. No thank you.
I am not a bull at this point, but I want to state very clearly is that this market has initiated a bottoming process on lighter volume and it looks like it wants to attack the upside now.
The longer term picture is still bearish to me, but we will have to see if the market is able to get up to the 1250 range. If so then need to watch and see if it is able to bust up into and above 1250. If it does that then it could start to create significant problems for the longer term bearish case.