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RealMoney.com: James Altucher
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A Low VIX Is Not Bearish

By James Altucher
RealMoney.com Contributor

12/3/2004 11:03 AM EST
 
 Market Commentary
  • People assume that a low VIX and a low put/call ratio means stocks will go straight down.
  • I don't see such a correlation.
  • Fear can be faded, but hope tends to persist.

A lot of people have been assuming because the VIX is low, the put/call ratio is low, etc., that it means no fear is in the markets, so we will go straight down.



I don't think this is true on the whole. I'll try to do a more detailed analysis over the next week, but there is no real tradable correlation apparent between the VIX or the put/call ratio and the markets.

In fact, the VIX is just settling down into the range it was in before Internet stocks spiked up volatility incredibly in the late '90s.

And there was so much cash on the sidelines prior to the election that this money is still being put to work into the markets, regardless of the fear/greed psychology of the marketplace.

Fear can be faded, as we saw countless times when panic levels got too high in the bear market and the markets snapped back with fury. But hope has a tendency to persist.

RealMoney Barometer Poll

1 What would best describe your stance heading into the coming week of trading?
Bullish
Bearish
Neutral
2 Which of these sectors do you think is set to move up in the coming week?
3 Which of these sectors do you think is set to move down in the coming week?


View the results without voting








James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and the upcoming Trade Like Warren Buffett. At the time of publication, neither Altucher nor his fund had a position in any of the securities mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback and invites you to send it to james.altucher@thestreet.com.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there from TheStreet.com.

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