TECHNICALS - SPY

It did not take long for volatility to revert to the mean. I mentioned after Tuesday's close that the range in the SPY for both Monday and Tuesday was 41 cents and low and behold yesterday we get the big move of $2.03. I suspected the move would be lower as the gap from last Friday remained unfilled. Keep in mind that the typical move in the SPY for a day is about one dollar so I guess we have to mean revert again.

The question I try to ask myself is not where we are in the markets but where we are going. The longer term chart points to higher and we are now quite oversold. I bought into yesterday's carnage and anticipate adding more SPY today. The 50 day SMA is a bit above the 130 level and touching that area would not be surprising. Buying the dips in the markets has worked every time for about three years so the odds are with the dippers.

The VIX/VXO duo has not quite hit the major overbought level of 10% above the 10 day SMA but it is getting close. Hopefully with the dip in the futures this morning the Vol sisters will ramp up and the final buy signal will be in place.

On a final note, it is quite interesting to watch bubblevision. Just a few days ago Kernan and the other bubbelites were asking each and every guest about the all time high in the DJIA and when we would hit it. Today each guest is asked if this is the beginning of the 10% correction. I guess this is why they are only allowed to own GE stock.