Thursday, September 25, 2014

Are You Still Bearish?

Stocks slid hard today with the Standard and Poors 500 index falling 32.31 points to 1965.99.  SPY, the ETF proxy fell to 196.34.  The market gapped down at the open and never recovered.

It should be obvious to all that the markets are oversold.  Today's daily standard deviation reading on a 20 day average view came in at -2.96, deeper than the -2.50 we set two days ago.  Consider however that volatility levels dropped significantly over the past three weeks so it doesn't take much to get oversold or overbought.

I was curious what the numbers would look like on the 4 week scale.  What I discovered might interest you.

On the 4 week scale, we are at a -1.38 standard deviation, almost the level where the last four spikes in 4 week standard deviation hit.  At 195, we would be at -1.43.

So seeing this, of course I was curious to see what happened with price after each of these spikes down.

The lows in both the standard deviation chart and the price chart are circled.

Here is the analysis:

Maybe it will be different this time?  Wouldn't hurt to add a few calls . . . just in case.

No comments:

Post a Comment