VIX Indicates a Search for a Short Term Bottom

Yesterday's session on Wall Street set a record on VIX volume. Having in mind that VIX is a risk measure, I can conclude we saw a Fear yesterday.
Chart:

                                                         source: www.stockcharts.com and CBOE

Of 2,382,752 contracts which changed hands yesterday, 1,850,206 were call contracts. It means that a lot of traders were hedging their positions against further U.S. stock market losses.
In the past, such a heavy trading was a good indicator of the short term bottom in the S&P 500. If this story repeats again, we should see a bottom within a few days.

Transportation and Industrial Averages - No Changes

Do you remember the chart of the month in my post published at the end of November 2013 ? If not,   here is the link.
But let us look at it again. Has anything changed ?

                                                                    source: www.stockcharts.com

I do not think so. As you see this is still intact.

Gold and Silver - Still In Down-Trends

In my last piece on precious metals ( here ) I was looking for a bottom in the sector. Well, while some tough speculators are probably betting heavily on this bottom, this is still an open matter.
Let us look at the chart below:

                                                                          source: www.stockcharts.com

Both silver and gold are still in their technical down-trends - which is still an argument for the metals sellers.
On the other hand, the big argument for the goldbugs is that both metals are above their bottoms recorded at the end of June 2013.

Facebook - Similar Situation To the Broad Market

Yesterday I published the charts showing the actions of the so-called Smart Money.

Today let me show how the Smart Money perceives the shares of Facebook. I guess this is a right time for that due to the latest report published by this company. It is not my intention to elaborate on the Facebook's financial results but only on the market action.

Firstly Smart Money's actions:

                                                                   source: Simple Digressions

As the chart shows, although Facebook shares are up 57%, Smart Money has been selling heavily in the reported period (down 32%).

Now Big Money's action:

                                                         source: Simple Digressions

Big Money started to correlate with the broad Smart Money index in October 2013. Since that time the Big Money index has been falling. As you can spot, the most impressive movement was at today's session.

Conclusion: Facebook shares are another example what Smart Money does. The late stage of the bull run on Wall Street is being used by the big players to sell as many shares as possible.

Update on Smart Money

Two charts below show the action of Smart Money in the U.S.
The first one shows the general Smart Money index:

                                                                             source: Simple Digressions

The crucial thing is that Smart Money has been selling out the shares since July 2012. This action has been taking place during the quite impressive bull market run. While the majority of the public was very busy in buying into the late stage of the bull, Smart Money was doing the opposite.

Well, but here is the next part of the story:

                                                                             source: Simple Digressions

Big Money is that part of the Smart Money which is active at the last stage of the daily session (to be precise - the last one hour of the session). This group of the players started to sell their holdings in May 2013, nearly a year after the general Smart Money. Big Money participation has added an additional impulse to the selling pressure initiated by the Smart Money in general.

Conclusion: presently Smart Money, together with its Big Money component, is selling the U.S. shares very intensively. While I do not have any slightest idea whether this combination triggers the bear market in stocks one thing is pretty obvious for me - this market seems to be matured for the correction of  at least 20 - 30%.

This Rarely Used Indicator Generates WARNING for the U.S. stock market

Has anybody heard of Skew Index ?
Skew Index is a risk measure  (quite different from the popular VIX index) published by CBOE. Without details (for those interested the details are here) this index measures the risk of a very rare market event, e.g. stock market crash or another black swan event. Let us look at the chart:

                                                                source: CBOE and Simple Digressions

Look carefully at the blue spikes of the SKEW index. During the on-going bull market, shortly after SKEW index spikes the relevant corrections took place. Presently the SKEW index value is around 130 - it is a very high reading meaning a very high probability of the spectacular event.

Signs of the Bottom in Precious Metals Sector

Although the medium term bear market in precious metals sector is still intact, the signs of the reversal can be spotted.
Let us look at the chart below:

During the bear market phase, silver prices fall more than gold. During the bull market phase the opposite occurs.
Look at the green lines at the end of 2008 and now. In 2008 the bull phase started with silver being stronger than gold. Now something similar is happening.