Boomerang effect

Coming weeks will be important for the long term. I do not mean to tell you about the expected events or developments like possible bankruptcy of some states, recurring liquidity problem of banks, credit card or commercial real estate default related problems. Certainly no one can predict when they exactly happen.

I will talk about what I see on the charts and try to give my perspective. As Atilla mentioned several times in the last few weeks, major US indices and sectors along with several emerging market indices have achieved their intermediate term targets projected by LT xTrend studies.
Among those indices, there is one that I always follow closely; VIX. As you may recall I had bought VIX 30 calls when VIX was trading below 30, testing lifetime rising xTrends last week. The reaction was powerful, the calls doubled quickly.
It was interesting to observe the fact that despite SPX rallied and VIX dropped further, those calls didn't loose much value, indicated that implied volatility spiked across the market.

This was the last piece in the puzzle after several weeks of topping action. I believe we are on the verge of a broad sell off which should contain lagging commodity stocks as well.