Long Volatility ~ market folly

Thursday, July 17, 2008

Long Volatility

Target: $34. Goal: pure panic. Unless we get a major market rally that can drop the VIX out of its channel, we are still on the (slow but steady) road to continued volatility.


Anonymous said...

I hold the same view, and will therefore play the devil's advocate. Don't you think everyone has agreed since the start that the bounce was technical? there was a consensus down, and there has been a consensus for that rally to happen, and the consensus thonks the rally will give way yto a new bottom.... How much can the consensus get it ight?

market folly said...

ya its interesting isn't it? all i can say is the "wisdom of crowds" is at work in that its easy to predict and so people are all piling on the same plays to make it a self-fulfilling prophecy or something.

at some point though, it will get dangerous in that because everyone is watching the same indicators and no one is actually triggering them, there will be a disconnect eventually.

for instance, rather than buying, this last rally was a whole lot of massive short covering. there was no panic, there was no capitulation. rinse and repeat the same cycle again until something happens that not everyone and their dog is looking for.