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While I am not going to go into any details on this indicator right now it is a "real money" indication that I've constructed to measure the amount of fear or panic taking place in the market. Currently it is showing similar fear levels to 4-9-12, 3-6-12, and 8-1-12. Those all led to rebounds in the market.
But you can see from the chart that it is possible for panic to move up quite a bit to reach even the levels in mid May of this year.
Any bullish reversal bar at this point should be respected for an upside rebound, but it is a situation like I have mentioned before, where we are probably pretty close in time to a significant low, but we may see some rapid price changes in a few days before the low occurs.
Given the pattern at play in the market right now, I've mentioned that we may see a rapid move back below the June 2012 lows. So unless we see a real nice set-up develop on the long side here, I would play this by tightening stops on short positions, and then using any rebound as a possible re-shorting opportunity.
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