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Wednesday, July 21, 2010


I have been really thinking about the VIX and what it is trying to say. Just because the wave structure of equities is an impulse does not mean that the VIX needs to be one too. Look at P1 and both the SPX and VIX. They did not move in lock step making 1-2, 1-2's together.

So if this triangle pattern is right on the VIX, we would have a few more weeks of decreasing volatility (or more correctly put, the volatility will be approximately constant). That would mean roughly that we would expect to see moves up and down of the magnitude that we have seen the last 2 weeks, and not moves of the magnitude of the flash crash, until the triangle finishes up. And then an explosion up in volatility as the price starts to crash.

So while this does not give us insight into the specific wavecount per se, if this triangle pattern is right (a big if), it is suggesting that the really impulsive part of the next wave down is maybe a couple of weeks away.

Just making some observations and sharing a few thoughts.

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