The major averages have rallied from 7% to 8% in 7 trading days since the August 16th lows. Meanwhile the Volatility Index (VXO) has dropped 46% since then as well (points A to B). In the past when the VXO has dropped significantly (points C to D) after making a substantial move higher this has been followed by a drop in the S&P 500 (points E to F) ranging from 2% to 9%. Thus in the near term it’s likely there is going to be some type of pullback with at least a 2% to 3% drop certainly possible. At this time I would be surprised [...]
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[Source: The Money Blogs]
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