Monday, February 25, 2008

Amidst Symmetrical Triangles, VIX and VWSI Slide

With market indices in a symmetrical triangle consolidation pattern, trading ranges have been shrinking as of late. The VIX has reflected this lack of action by dropping to its lowest levels relative to its 20, 50 and 100 day simple moving averages since the beginning of the year. After touching 26.95 on Wednesday, the VIX fell back to end the four day week at 24.06, down 0.96 (3.8%) from the previous week.

A symmetrical triangle pattern is often resolved by a dramatic move one way or the other. In the current market environment, the direction of that move is anyone’s guess, but for now, I am positioned for a move to the upside.

The VWSI is a little more cautious and is showing a +1 reading at the moment, down from a +3 last week and, essentially neutral about market volatility in the near-term, suggesting that a sideways to slightly more volatile market is the most likely course of events for the coming week.

As is my weekly custom, for a survey of the best in current thinking about the markets, Barry Ritholtz at The Big Picture sums up the week that was and the week that is on tap in his Oscar Night Linkfest.

I am toying with introducing a multi-faceted sentiment indicator in this weekly VWSI space, but for now I am sticking with the VWSI:

(Note that in the above temperature gauge, the "bullish" and "bearish" labels apply to the VIX, not to the broader markets, which are usually negatively correlated with the VIX.)

Wine pairing: For a VWSI of +1, I recommend a guwurztraminer. My favorite American version of this wine is the dry gewurztraminer from Londer Vineyards of Anderson Valley. I have not yet sampled the 2006 vintage, but the 2005 was an unforgettable wine that I would love to see in a blind tasting against some of the top Alsatian competition.

In my previous roundup of California gewurztraminer, I suggested Navarro and Harvest Moon. For some of my top selections from Alsace, check out Trimbach; Hugel; and Domaine Weinbach. You can also check out the top-rated gewurztraminers in the 2007 San Francisco Chronicle Wine Competition.


Anonymous said...

Neutrality...hmm... now to the important stuff: Would it be possible to give a recommendation on some white burgundys? ;-)

Bill Luby said...

Great question, anon. I wish I had more recent experience with white Burgundies, but living just next to Sonoma wine country, I must say that I have become partial to some of what I can find locally.

My two favorite (US) chardonnays from recent months have been:

1) Hartford Court Stone Côte Vineyard Chardonnay (Sonoma Coast) -- both the 2004 and 2005

2) Lynmar Quail Hill Chardonnay -- again, both the '05 and '05 are winners

I got each of these wines through their respective wine clubs, but I suspect that they can be had for about $50 or so at retail. Certainly not cheap, but if you are interested in California chardonnay in this price range, I would recommend that you take a flier on these if you can find them.

Good quaffing!


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