Thursday, December 22, 2016
VIX Volatility and SPX S&P 500 Weekly Charts; VIX 10-Handle; Record Multi-Year Low; Significant Market Top At Hand on Weekly Basis
The money managers, pundits, analysts and other talking heads are parading across television screens telling Ma and Pa Kettle to go long the stock market. Aunt Agnes is afraid to miss the big Trump Rally so she took her entire life savings and put it in the stock market this week. Uncle Johnny, that gets by each month with the help of his social security check, swore off the stock market after losing a bundle of money in the 2008-2009 financial crisis. He is now enthusiastic about stocks and placed his entire life savings into dividend stocks yesterday. The bullish prognostications are off the chart. Volatility agrees.
The VIX prints an epic 10-handle yesterday with a low at 10.93. There is no fear in the markets. Traders and investors are completely worry-free, sipping Fed wine and ECB champagne, buying stocks with reckless abandon and enthusiasm while cheering King Trump's policy path ahead. The future is so bright that you have to wear shades.
The red circles show significant market tops when traders are partying like its 1999 without a care or worry in the world. The green circles show significant bottoms when fear and panic is rampant and there is blood in the streets. What do you think will happen?
Looking at the double red circles that printed below the VIX 12 level, the selloff in the stock market began in short order afterwards, within a month or two. The VIX has been sub 12 now for about a month so the stock market may be peaking at any time forward. The double circles result in losses of 140 points, 90 points, 200 points and 110 points, over a period of from 1 to 3 months. The average loss is 135 points. The smallest drop is 90 points; the biggest 200 points. Dropping the smallest and largest numbers, the average drop is 125 points.
A projection of a 90 to 200 point loss in the S&P 500 say over the next month or two would place the SPX in the 2065-2175 range in January or February. Do you think it will happen? At that time, Aunt Agnes and Uncle Johnny will be eating cat food for dinner and burning junk mail for warmth. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.