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Tuesday, August 21, 2007

 

update on vix commerical contracts open


a week later, the net commerical position in the vix had gotten yet longer. through august 14, the position was +12,682 (52439 long against 39757 short). current report here -- next update should be out friday august 24, reflecting today's positions, which are post-expiration and likely to be quite different.

the lag is frustrating, but clearly the non-commerical shorts were squeezed very hard this week and should have been compelled to reduce. if they haven't, i'd call that a contrarian indication of more volatility ahead.

marc faber also notes that an intermediate low may be in, but....

Faber is also “not surprised”, he says, by the strong rally from the August 16 intraday low, “because investors are still conditioned to buy the dips and not to sell into strength”. The fear of ‘missing the next advance’ is negative for the market, from what Faber calls his “contrarian point of view”.

His “best guess” is that we have seen an intermediate low, but that the S&P500 - which, as of last week’s close, was still down 100 points from its July 2007 high - “will have great difficulty reaching a new yearly high”.

A glance back at the last 17 months of the S&P500 shows “very strong overhead resistance” between 1500 and 1540, says Faber. “Therefore, I would use additional strength as a selling opportunity.” “It is also my view that, in time, the recent August low and the March 2007 low at 1363 will be taken out on the downside.”

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