SATURDAY 04APR 2009

(Please click on chart to enlarge)

VIX IN FOCUS

CBOE Volatility Index (VIX) currently at 39.70, has come into focus of the traders. Volatility cooling down is a very good sign for the markets. The pattern in the chart suggests that this index has almost breached its triangular pattern which is a very positive sign. If there is a move further down, say a close below 39 (and more so below 36) would keep the U.S. markets in high spirits. It is also a bellwether index for the world markets. Most of the technical traders world over watch it closely.

Analysts are of varying views about its levels. Some suggest that its moving below 35 would suggest a return to primary uptrend. But that would be too optimistic. The favoured view would be a touch of 20 to confirm the market bottom for 2009.

The breakout gives a down target of 20 over the next 3-6 months. But it may not be taken seriously because given the outlook for the equity markets over the next few months it would be difficult for this index to touch that level. Yet, we should take solace in the fact that its trading around 30 to 40 levels also would be very positive for the bulls.

Whatsoever, this index raises hopes in near to short term, at least suggesting that the markets are a buy on decline with adequate stop losses.
Medium term investing can be considered in the U.S. markets on its decline below 39 to 36 mark.