Yes, I think it may be.For those who are casual traders, this type of market timing opportunity is worth taking a look at.Why, even Warren Buffet recently bought back into the market!He knows that you can never time the market outright, but certainly there are better times to buy than others.Right now, there are 2 items of interest that are In My Humble Opinion about to take the market higher and move the pricing floor higher shortly.The technical events are related to the movement of the VIX index and the fundamental event is the settlement of Washington Mutual’s Credit Default Swaps both of which interconnected events should move the markets 10% higher and probably keep them above that benchmark for some time to come (or at least a few months until early next year).
For those who don’t know what the VIX is, it is an index that the Chicago Board of Exchange (CBOE) publishes which tracks the options market’s Implied Volatility of the market’s option contracts on the price of the S&P 500 Stocks.This is an indicator that explains the implied risks of holding a market index fund with the 500 largest stocks, which is a simple and managed way for individual investors to gain exposure to stock market returns, while limiting exposure to losses that indivudual stockholders may suffer in tough times (ie. a Bear Stearns stockholder got essentially wiped out, but a SPY investor only has lost 40% of value this year). When the VIX goes up, it indicates that the stock market is a riskier investment, when it is low, it indicates that equities are a strong investment.If you have ever read about Warren Buffet, one of his most well known aphorisms is “When the market is greedy, be fearful; when the market is fearful, be greedy”.
The VIX is Wall Street’s Fear Factor and at its current levels, it is still in the danger zone, higher than 9/11 or the Long Term Capital panic in 1998.As I write this, it is over 60%, which to put into perspective, it’s previous historical high was 9/17/2001.Typically anything over 30% is a major drop in the markets, and anything over 40% is an absolute panic, yet, it has been trading over 50% for weeks now!The leading indicator in the bond market of the risks of doing business is called the TED Spread and a reading above 200 is also panic territory, and right now, it is flirting with dips under that level.What does that all mean?It means that the markets are actually very close to regaining a semi normal amount of confidence.
The financial Weapons of Mass Destruction, aka, CDS or Credit Default Swaps are the unregulated insurance contracts on the failure of bonds, securities and corporations which by sharing risk without regulating insurers havefinally settled through the DTCC and the losses only amounted to $1.4 Billion.The market has been atwitter that parties could fail as a result of their having insured WaMu’s debts, portfolio of loans, etc.Now that the settlement has passed, major investors will start to look for points of entry into financial stocks.
It might seem magical, but with the Fear Gauges topped out and on the way down – the VIX has more to go, but this will happen when the rally hits, as it is a lagging indicator – the market will make a major move upwards into a new trading range.The DOW isn’t going to hit 14,000 off of this, but it might begin to flirt with 10,000 again and stay in a higher range for at least a quarter when this rally happens.