Daily Investment Interpretations

July 2, 2008

2008-7-2:  Today, the Dow fell to a level not seen since September, 2006 (11,215.50), while the S&P closed within 4 points of its March 17th intra-day low of 1,257. Not to be outdone, the Nasdaq Composite posted a relatively greater decline of 52.5 points, leaving it only 96 points above its March 17th bottom. In the meantime, the VIX made it all the way up to roughly 26 as oil futures prices hit a new record of $143.87. Perhaps the real question is: how much farther do the major market indices have to fall before the VIX reaches turning-point levels? A look at its chart shows that on August 9th, 2007, when the VIX hit 26, it spiked at 37.5 just five trading days later (on August 16th) When it closed at 26.5 on November 9th, 2007, it peaked at 31 just three trading days later, on November 12th. On January 9, 2008, after hitting a high of about 26, the VIX closed at about 24. For the next five trading sessions, it hovered in the lower 20's. Then on January 17, it closed at 28.5, and two days later, when the market indices hit their January bottoms, the VIX once again hit 37.5 intra-day before closing that day (January 19th) at 31. On the last day of February, the VIX closed at 27.5. From there, it hit a peak of almost 30 on March 10th, dropping back to close at 27.2 on March 12, followed by a rapid rise to 35.6 three trading days later.
    The gist of this is that it looks somewhat likely to me that there will be at least an intermediate market bottom within the next week or two.