Equity volatility may already be making it's move.
We're not seeing the mess we had at the end of last Feb., (yet) but new S&P peaks are successively lower while VIX peaks are higher.
If I were smart I'd start shorting.
Posted on 07/05/2007 2:29:00 PM PDT by VA Voter
16:20 ET Dow -11.46 at 13565.84, Nasdaq +11.70 at 2656.65, S&P +0.53 at 1525.40: [BRIEFING.COM] The major averages finished mixed Thursday as a market increasingly sensitive to rising interest rates weighed the latest uptick in bond yields against more takeover activity and leadership from the tech sector. Equity traders also didn't want to place any big bets ahead of Friday's influential jobs report; today's ADP report showed that payrolls in June grew at the fastest rate in seven months.
Before the bell, market participants were greeted with yet another day of deal making, and further evidence that private equity deals remain alive and well. The day's biggest deal involved Hilton Hotels (HLT 45.45 +9.40), which agreed to be taken private by The Blackstone Group (BX 30.56 +0.84).
...snip...
After slipping below the psychologically significant 5.00% level earlier in the week, the yield on the 10-year note surged 10 basis points from Tuesday's close.
(Excerpt) Read more at news.moneycentral.msn.com ...
Equity volatility may already be making it's move.
We're not seeing the mess we had at the end of last Feb., (yet) but new S&P peaks are successively lower while VIX peaks are higher.
If I were smart I'd start shorting.
How did you do that? Post the graph that is.
Just so you don't mind waiting out some possible higher highs.
Peaks in -7 years often come in August or later. The following correction can be a doozy.
I'm not saying don't short now, but it could be early.
OTOH, the Shanghai (shank-them-high) bubble may have already peaked (another big drop last night).
--The graph part was from msn money, and it's made from two different plots that I copied and pasted into paint. I saved the combo as a .gif, and then uploaded the gif to one of those websites that lets you upload pictures and you get a link for the picture --the graph link ended up being http://peteann.hypermart.net/econ/snpvix.GIF . .
When I posted my comment, I did it in html to get the italics etc., and the code for inserting the picture ends up being:
img height="588" src="http://peteann.hypermart.net/econ/snpvix.GIF" width="732" align="right" border="0"
The easy way to get all that is to use some html program like FrontPage, or you can even use MS Word and save as html, and the program will make up all that code stuff.
I've heard others tell me that the 'border', 'width', etc., commands aren't necessary, but I'm just too lazy to clean it up before posting.
Enjoy! --and let me know if anything doesn't work.
Also, those downward peaks and dips show up on the S&P 500 but not on the NASDAQ which keeps making new highs...
The past year's been nice, no doubt about that. Another way of looking at it though is that it's not all that much considering how much upside we're still due after that dot.com/911 bear.
The investor's two biggest enemies are fear and greed. The trick for me seems to be figuring out which one am I dealing with.
From a guy named Lee Wheeler, who is a real genius with historical trivia:
“Unlike some folks here, I have no idea if the market will break out here, break down, remain in a range, etc.
All I know is that we are situated at the most important price inflection levels in five years.
However, if the market were planning to decline later on down the road, this sort of strength into July (and possibly August) is exactly what you’d expect to see, especially in a “7” year like 2007.
In fact, making new annual highs into Jul/Aug is one of the hallmarks of a future “7 year” selloff. At least that’s been the case over the past 100 years or so. And the Dow has actually made its high for the year in Jul/Aug in seven of the ten occurrences.
Believe it or don’t, the Dow has finished the year lower than where it was on August 1 in every “7” year since 1907 (except for 1927). And unlike recent years, there have been no 4Q bailout rallies.
Will 2007 be different? Guess we’ll find out soon enough.
1907: 45% Dow Jones waterfall decline from Jul-Nov. Rich Man’s Panic.
1917: Dow Jones waterfall decline Jul-Nov.
1927: Dow topped for year in early Oct. Fell 11%.
1937: Dow topped for year in mid-August. Waterfall decline from Aug-Nov.
1947: Dow topped for year in late July. Fell 8% and traded in a range thru year-end.
1957: Dow topped for year in mid-July. Waterfall decline into Dec.
1967: Dow topped for year in late Sept. Fell 13% into Nov.
1977: Dow topped for year in Jan. Fell all year.
1987: Dow topped for year in late Aug. Crashed in Oct.
1997: Dow topped for year in early Aug. Fell 16% into Oct.”
I assume you caught the point that doesn't always happen in the second half of -7 years.
You can play the seasonal probabilities or ignore them, that's up to you, but I can guarantee you won't be around 200 years from now to take advantage of the fictional "Total Nominal Return Indexes" in your chart, which is made up of an ever-changing mix of stocks that no one would ever actually invest in even if they were to live eternal. Doggy stocks are dropped from indexes over time which inflates their performance artificially, not to mention that fact that nominal returns are meaningless in a world with inflation.
I'll be the first to admit that there's a lot going on that I don't catch the first time, and I'm always eager to learn new stuff every day. I'll confess that I totally missed the part you mentioned about "doesn't always happen in the second half of -7 years"--maybe we're both being hampered by communications gaps here.
What I got from your post was that Wheeler's figured out something about -7 year patterns, but whatever it is it's not anything that can tell us which particular financial instrument we should buy, sell, or hedge. If there was something that Wheeler's saying we're supposed to do, then please let me know what and why.
My point was that while I was unable to see any of the stock price patterns he was talking about, I have managed to see that data going back over hundreds of years show that stocks average 7% over inflation -far better than either bonds or metals- and that there's never been a 10-year holding time that hasn't yielded an inflation adjusted profit.
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