Dick Arms has what may be the most challenging technical charts I have seen in a while for the bulls:

“There are times when the market gives the impression it is fading into nothingness. Volume becomes very low, trading ranges become very small, volatility becomes very low. Also, there is very little change in market levels and day-to-day fluctuations are minimal. Looking back at history, when that happens it is almost always a sign of a market high point.”

The chart — the VIX is inverted – below is a warning:

 

Complacency? Dow vs. VIX

click for ginormous chart  

Source: Dick Arms

 

 

For more info on institutional research, contact:
RICHARD W. ARMS JR.
800 WAGON TRAIN DRIVE SE ALBUQUERQUE, NM 87123
OFFICE (505) 293-4438 FAX (505) 298-2833

(VIX inverted so tops appear to match Dow tops).

Category: Markets, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

17 Responses to “The Disappearing Market”

  1. PeterR says:

    Unless, of course, DJIA breaks out from current double top (+/-) and goes to new highs, in this, an election year.

    If the markets perceive a rising possibility of a Romney/Ryan win, more quantitative easing etc. etc., an alignment of diverse interests could drive the equity markets much higher IMO, in a blow-out Santa Rally.

    The VIX chart appears to be inverted (1/VIX) BTW. Look at the left side of the VIX chart. Many years of readings ABOVE the current high (low VIX).

    TBD for sure, but don’t bet against GREED driving us higher from here IMO.

  2. Yes, the VIX is inverted — I’ll make a note above as to that . . .

  3. [...] But Dick Arms spots the potential for a market high point here with volatility fading.  (TBP) [...]

  4. dead hobo says:

    I’ve got a plan that I will profit from if I’m lucky. It relies on the markets continuing to remain optimistic so long term rates rise to the levels of a few months ago. And, if I’m lucky, they peak again at the mid 3% range. If this happens then long term bond fund here I come. When Europe collapses, the 30 year will again fall to 2.5% or lower … possible it will break into the top 1% range. I know this is wishful, but it is still possible. All we need are happy computers who keep busy batting around stocks without distraction for a few more weeks. Some great European headlines, or no headlines at all, plus an army of sales pundits will be welcome to make this work. Europe has a sovereign debt bubble as large or larger than the mortgage bubble of a few years ago. No number of summits will make it go away. Boom.

  5. brokrbob1 says:

    Looks to me like the thesis works, except in 2004, 2005, 2006 and 2007.

  6. Rightline says:

    pretty small sampling for my taste. seasonality may also be a factor.

  7. personally, I think this Post is, very, Timely..(further, the Charts, depicted, are very well-drawn..)

    10. To bring about deliberately; provoke

    23. To formulate or devise from evidence or data at hand:

    v. intr.
    11. To make a likeness with lines on a surface; sketch.
    http://www.thefreedictionary.com/draw

  8. Moopheus says:

    brokrbob, it’s called cherry-picking your data.

  9. Frilton Miedman says:

    Wor dof caution, going back over 20 yars the VIX exudes a pattern over 5-7 year periods where it ranges at different levels.

    In the period from 1990-1995 it ranged to as low as 10, from 1997-2003 19 was the low end, from 2003-2007 it ranged as low as 10, since then, five years now, it has ranged at a low end of 16.

    Strangest part about it, these ranges don’t seem to reflect either bear or bull markets.

  10. Frilton Miedman says:

    Word of caution, going back over 20 years the VIX exudes a pattern over 5-7 year periods where it ranges at different levels.

    In the period from 1990-1995 it ranged to as low as 10, from 1997-2003 19 was the low end, from 2003-2007 it ranged as low as 10, since then, five years now, it has ranged at a low end of 16.

    Strangest part about it, these ranges don’t seem to reflect either bear or bull markets.

  11. jeffg says:

    Dick Arms has forgotton more about the market than most of us will ever know. I like to listen to him….

  12. Low Budget Dave says:

    I think the small investor could use some advice right about now.

    I have a friend who never reads anything, and just invests based on general feelings that he gets from people he meets at the hotel where he works. His string of successes is like Warren Buffett’s, only without all the messy “rational thought”.

    I never paid much attention to his investing, because it was like watching somebody win at gambling.

    A few days ago, though, he sold everything and is just sitting on cash. This seems like a different form of gambling, but this is one where I can repeat the thought process.

  13. I think Frilton Miedman is right. go back further. VIX range is different during other market environments

    Don’t see why it can’t go lower . see here from a month ago http://allstarcharts.com/tell-me-again-why-cant-the-vix-go-lower-from-here/

  14. nofoulsontheplayground says:

    There is a “mirror” pattern on the Dow and SPX charts that suggests that while the SPX could move up to as high as 1525 by December/January, there stands a good chance of a drop down to about 1200 by the end of January, with the ultimate target being about 885 SPX.

    The timing of this works well with seasonality. It would allow us to look for narrowing breadth if the indexes move up into that Dec/Jan window, which would help confirm a this set-up.

    In the meantime, there are way too many cup/handle formations out there to get too terribly bearish. The market internals last week suggested 2-weeks of weakness, or weakness into the end of August.

  15. [...] The Disappearing Market | The Big Picture [...]

  16. [...] On Monday, we showed Dick Arms’ chart correlating this level of VIX with subsequent market tops (The Disappearing Market). [...]

  17. jimtermini1 says:

    Nice charts, but someone must explain why the DJ gained 40% between 2004 and mid-2007 while the VIX was also over the line. Charts can be useful, but beware of contradictory charts, those that are self-impugning in supposedly trying to convey a compelling argument!