Traders' Corner: Intermediate Term Bottom Near?
There are a few sentiment indicators that are pointing to at least a short term bottom in the market very soon. The first indicator is the VIX which is sometimes used an indicator of fear in the marketplace. On 10-6 the VIX hit an intraday high in the mid 50's. That is an extreme level of fear and often will produce a tradeable bottom. (See chart below)
The other thing that makes me believe at least a short term bottom is near is that next week is an options expiration week. Mr. Market hates when there are too many people on one side of a trade and the Put holders are very large in number right now. This makes me believe that a miraculous rally will appear before next Friday so that as is so often the case, most options will expire worthless or with little value. Look for a rally in the Dow to start on 10-8 or 10-9 that carries it to near 11000 before the 10-17 expiration. I wouldn't bet the farm on this trade because of the market conditions, but I believe some kind of rally is way overdue!
Have a great week!
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