Monday, March 23, 2009

OUCH...wave 1 looks like its dead and we are in wave 2...

The rise today was as about as explosive as you can get and clearly punctured into and closed in the original wave 1 down area. So the odds of this being wave 4 are now dead. As you can see from the chart we were in a rising wedge previously and broke down out of the wedge on Thursday. Today's sharp rise retested the bottom of the trend line. So we can currently expect a retrace at some point to exit the short positions.

I just popped over for a quick look at the VIX after I actually published this blog entry...and its in a strange place. I fully expected the vix to be in the 30's...but instead I find it at 43. In fact it is outside the descending wedge (the counterpart to SPY ascending wedge). The Vix did not even make it to retest the trend line.
So with somemore investigation I found the above divergences. Something strange is going on here. The market rallied like mad...but the fear did not go down noticeably?