Saturday, November 7, 2015

Sentiment Update, Zooming in on the VXX Volume, Nov 7, 2015

Previously on Nov 3, I indicated that my sentiment composite#1 had given a sell signal, but that I was hesitant to make an "official" call due to the high VXX volume.  The composites are heavily weighted by put/call ratios which tend to be early in bottoming and actually increase many times prior to a top due to "smart" money correctly positioning for a decline.

So today I want to show a chart of the VXX volume indicator and what it would take to generate a sell.  Note that this was the only indicator that I watch that gave warning before the August crash.

Using the different EMAs, I expect the 5 day (green) to reach at least the .6 level (currently .73) and preferably the .5 level.  The longer term 20 day (blue) has been very slow to come down, and currently at .85 should drop down to about .65.  Comparing the 20 day to the position before the Sep and Dec 2014 tops, this could be two to four weeks away.

In conclusion, this certainly supports a move to new highs with the potential targets given as SPX 2150-70. Timing bands for a top extend from Opt Exp to Thanksgiving, with maximum risk seen in Dec-Jan (China).  The decline last week of 30 SPX points was almost identical to declines prior to rally tops in July and Sept of 2014.

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