I've often heard some investor-traders refer to technical analysis as "voodoo." Granted, there's a lot of so-called "indicators" out there that are more than a little mysterious and subjective, from Gann lines to planetary alignments. And some of their proponents are in their own galaxies as well.

But analysis of charts, whether you call it "technical" or otherwise, has some other credible windows on the "fair" price of assets and commodities that you may not readily think of at first. One is psychological -- in fact, I often call technical analysis "psychological" analysis because of my passionate interest in behavioral economics -- and the other is statistical.

Last Tuesday I noted the record-breaking volume in the the SPDR financial sector ETF (XLF), as significant enough to mark a short-term bottom in the entire market's slow drift to new 2 year lows. It wasn't the dramatic sell-off we all might have been looking for, but you can't argue with 469 million shares in the XLF when the last record was set only days before at 300 million. And my confirmation trade was the SPY trading over 500 million shares. All it took for last Wednesday's powder-keg rally was someone to light the fuse. Wells Fargo's (WFC) strong numbers and the SEC's sheriff going after the shorts did the job.

But, you know what we didn't get? We didn't get a dramatic spike on the VIX, the volatility index on S&P 500 (SPX) index options. I kind of suspected that we might not get the explosion in volatility to the mid-30's after talking to Bryan Perry of ChangeWave Tactical Trader two weeks ago. He thought we might not see the VIX spike to previous sell-off levels like we saw on the last 3 tradeable bottoms (Aug 07, Jan and March) because it was too easy and everyone was expecting it. Granted, the VIX spiked a little up through 30, but it definitely wasn't what the market had trained us to look for in terms of fear-driven options trading.

On Tuesday, I was watching the volume in the financial sector ETF (XLF) because we had just hit a new all-time low at $16.77 and we were on the way to exceeding the all-time record volume above 300 million shares hit just the Friday before.

Why was I watching the volume so closely? Because I'm a sucker for capitulation-type panic selling that usually marks bottoms. No, it's not the perfect indicator. But, I've seen it happen so many times in my ten years of trading that I can't argue with it's reliability on an index that I know isn't going to zero and is down 50% in the past year.

Yesterday I spoke with Jud Pyle, Chief Investment Strategist at The Options News Network, about trading action this week in regional bank names like Wells Fargo (WFC) and US Bancorp (USB). These stocks have been punished lately, along with the rest of the regionals, despite the fact they have reported no significant losses due to subprime risk and foreclosures. Both of them hit fresh 5 year lows yesterday on conjecture by investors that, as Pyle says, might go something like this: "Yeah, we know you haven't told us about losses from demonstrated bad business practices, but since we can't be sure, we're gonna need to sell you anyway."

Did the lending standards of these banks falter at all like some other regional banks, such that their financial stability will be greatly threatend? Until we know, investors are still adopting the best practice for financial uncertainty, in use since the Bear Stearns meltdown: if in doubt, shoot first! Unlike KeyCorp (KEY) and FifthThird (FITB), two among a handful of regional banks that had to cut their dividend, WFC and USB are still trading well above book value. As of 2:30pm EST yesterday, both WFC and USB had recovered strongly with the broad market from new lows hit in the morning.

The July issue of Smithsonian magazine has a fascinating article on Viking explorers titled “Raiders or Traders?”, in which the author challenges the overwhelming stereotype of plundering marauders by digging through evidence of their mercantile habits.

I’ve been holding a similar discussion for several weeks about the exploits and objectives of one of the world’s most successful investor-pillagers.

Shares of Huntsman Corp. (HUN) fell by over 40% yesterday as markets digested the news that buyout firm Apollo Management and one of its businesses, Hexion Specialty Chemicals Inc., announced after the market close yesterday that they were suing to back out of an agreement to acquire the chemical maker for $6.5 billion. To quote from a BUSINESS WIRE press release of June 18th:

Hexion said in the suit that it believes that the capital structure agreed to by Huntsman and Hexion for the combined company is no longer viable because of Huntsman's increased net debt and its lower than expected earnings.

When Yahoo (YHOO) and Microsoft (MSFT) turned their interest away from each other last week, and Yahoo made an advertising deal with Google (GOOG), options activity exploded to over 500,000 contracts on Thursday and Friday.  This is double the daily average volume according to Joe Burgoyne of options analytics provider Ivolatility, who also noted that while volatility has jumped up about 10% for July options, it is still in the middle of its 52-week high/low range.  Volatility is a relative way of comparing option prices, all other factors being equal.  All this activity, without a panic spike in volatilities may indicate some solid opportunities for option investors who have a view on Yahoo.

Last month, billionaire buy-out king Carl Icahn established a 49-million share position in Yahoo using options, as reported by the Wall St. Journal and The Options News Network on May 16^th.  Icahn accumulated his massive options position when Yahoo shares were trading around $25.  Things looked pretty good for him for a couple of weeks as the stock climbed above $28 and other activist investors chimed in to support his overthrow of existing board members who were blocking the Microsoft bid.  But, when hopes that Mr. Softee would be able to get a deal done faded again, Yahoo fell over $3 last Thursday.