Stock Market Analysis for 8/19/06

Although we did see an impressive rally this week one thing to keep a close eye on is the Volatility Index (VIX). The VIX is quickly approaching a level (black line) that has eventually signaled a nearing sell off during the past year below a value of 11. If the VIX continues to drop and falls below the 11 level within the next week or so this could be a signal of a nearing sell off. Also the last time the VIX rose rapidly (points A to B) this was then followed by a quick drop (points B to C) back in June which was then followed by a substantial sell off in the S&P 500 (points D to E). Thus keep a close watch on the VIX over the next week or so because if it drops below 11 this could be a signal of a nearing sell off as we move into the month of September. Also keep in mind historically September has been the worst performing month for the market by a long shot with the Dow being up only 37% of the time since 1900.

You can read our complete market analysis at

http://www.amateur-investor.net/Weekend_Market_Analysis_Aug_19_06.htm