Thursday, December 15, 2011

DJIA & VIX: Daily VIX Is Grossly Oversold

DJIA: Downside bias amid weakening technicals
Deteriorating economic outlook and debt crisis in Europe coupled with the prospect of mass credit ratings downgrade in Europe as well as the latest batch of China weak economic data has resulted in volatile market swings, risk aversion, vulnerability
and growing demand for safe havens.

After rebounding from 25 November low of 11232 points, the Dow surged to as high as 12266 on 7 December before retreating lower to close at 11823 yesterday, below the 200-d SMA of 11942 points.

Following the breakdown of 200-d SMA and mid Bollinger band (11829) as well as the weakening technical outlook, downside risks of Dow Jones has increased. Further supports are 11774 (50-d SMA and uptrend line support near 11600. Immediate resistance levels are 11942, 12000 and 12266 levels.

VIX: Anticipating a technical rebound
The European euphoria was short-lived as investors fear resumed this week given the VIX, also known as the "fear indicator, rose from recent low of 23.3 to end at 26.0 yesterday, above the long term uptrend of 200-d SMA at 25.6.

In view of the grossly oversold indicators, we may witness possible technical rebound in the coming days amid rising external woes. A breakout above the downtrend channel near 30 will likely to prompt more upside towards 35.0-36.0 territory, triggering an alarm bell to Dow and global equity markets.

Immediate supports are 23.3 and 20.0.

Daily VIX: Grossly Oversold
VIX index 15-12-2011



Source: HLIB Research

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