Wednesday's Update

By: Marty Chenard | Wed, Oct 27, 2010
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Sometimes, it is just good to have someone bring something to your attention.

Like what has been happening on the NASDAQ 100 and the VXN in the past two weeks.

The VXN is the Volatility Index for the NASDAQ 100, so it tracks inversely to the NASDAQ. In order to make it track the same way, we will invert the VXN's movement in the chart below.

AND ... to get them both on a comparable scale, we will plot the zero based Relative Strength levels for the two and then compare them.

So, now we are ready to observe what has happened on the two indexes since the beginning of September, and more notably ... what has happened in the past 2 weeks.

* First, let's look at the September to October 26th. time period. I have drawn two blue lines for that period and you can see that they both show an "up trend". That's good, as they are both in sync as they should be.

* Now, let's look at the time period from October 11th. to yesterday. Once again, I drew blue lines showing how they started and how they ended.

This time, we have a noticeable difference in behavior. The NASDAQ 100 went up, while the VXN moved down.

What does that say?

It says two things. One, that the VXN is Negatively Divergently with the NASDAQ100, and two ... that the fear levels have increased on the NASDAQ while it has been rising during the past two weeks.

Increasing fear is not a good thing, because people avoid what they fear ... and, avoiding the NASDAQ because they were invested, would require selling for those invested. So, watch what is going on here because conditions on the two are out of sync.

 


 

Marty Chenard

Author: Marty Chenard

Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

Marty Chenard is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools and stock market models. As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL. He is an advanced technical analyst and not an investment advisor, nor a securities broker.

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