January 30, 2004

Patience Breeds Panic

You have to wonder about the fundamental strength of a market that gets rocked by a change in words, from "considerable period" to "patience." If nothing else, Greenspan roused the market from its lethargy. Check out the VIX below...which jumped off its 7-year lows and promptly crossed above its 50-day moving average. (Note: this is the "new" VIX from the CBOE. It's calculated based on all the options traded on the $SPX. The old index (VXO on bigcharts.com) calculated volatility based on just eight at-the-money options...more on this in another post.) As I showed in the January issue...a rising VIX is usually very bad for stock prices. And even though bond prices were under pressure yesterday, I believe this dynamic of a rising VIX and falling stock prices will be bond bullish. We'll see...


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