Sunday, February 22, 2009

Fear index VIX - "if necessary I can go down from here." DIA, SPY, TSE, CDNX, TNR.v, CZX.v, SST.v, MGN, CNU.v, FVI.v, BTT.v, OK.v, FXI,, ASM.v

As miserable as it gets with general markets sliding this year and Dow making last week a new 6 year low, Panic VIX is not in the picture to the magnitude of panic with public selling at the exactly wrong moment in last November. We will refer to our entry on Dow ans S&P 500 before for clear understanding, but we here should make an important observation: VIX is not making new highs with new Lows in Dow, Fear Index is in a clear Down Trend so far, showing that professionals are not willing to pay huge premiums for PUT protection if the bottom will fall out again. Yen has made a double bottom below 90 and is going up to 99.23 now, Euro just has made a Double Bottom and US Dollar is sliding down so far for two days from Double Top Reversal formation. Risk appetite is back, liquidity is filtering down the system, Gold is screaming Inflation and Debasement of the paper currencies is working. With new Gold highs above 1000 even with consolidation in Cup and Handle Formation at 1000 level as average, Diminishing Fear will push money into Junior sector where valuations are still depressed to the levels of End of the world scenario.
For all our Junior plays it was always important:
1. Underlying Currency or Commodity is back in fashion (it has happen with Gold and Silver).
2. Country risk is not exaggerated. (Canada, Alaska are already back in play - Canada Zinc Metals CZX.v Chinese investment at over 100% to the recent market price, Mexico and South America are warming up, M&A is driving interest in Argentina: Minera Andes - Robert Mc Ewen investment - Los Azules - TNR Gold TNR.v plays, next will be Africa with Chinese - when values will encourage investments even after heavy discounting for Mess).
3. Risk appetite will push money down the food chain driven by M&A in sectors which are working, play now is searching for value and next acquisition targets: Gold is the one which is on the radar screens now. Here VIX is coming into play and next Bear rally in Dow and S&P 500 will return Decoupling back with all our reinflation plays: China FXI, Grains and Juniors in Gold, Silver, Zinc and Copper. VIX sliding below 40 and rallying Equity markets will Cry Inflation after Gold for the deaf ones, Treasuries will continue its Bubble Bursting cycle with flood of money coming back into "risky plays" equities, commodities and emerging markets - Money will chase the returns again and will flow in reinflation plays.
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