A Wild End to a Wild Week: Dave's Daily

Markets finished Friday higher but only did so due to a final 10-minute options related (I think) burst. I said it would get weird today with conditions short-term much oversold and options expirations.

More liquidations was the early market feature then the usual suspects, trading desks, hedge funds and maybe (Big Brother) pounced forcing a short squeeze. That lasted until mid-day when things started to drift away lower. But then most likely, options related activity kicked things higher into the close.

The Germans did what they had to do and the euro rallied further.

Volume was especially heavy much due to options-related activity. Breadth reversed course and was positive.

This presentation will be brief today as we have meetings that are a priority.

The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term. Sharp rally Friday leaves it still much oversold.

The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise. 10-15 minutes of buying doesn't alter the current fear measure.

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