VIX Volatility Daily Chart Multi-Year Lows Signals Complacency and Market Top

The complacency is rampant in markets. The continuing bullish euphoria is fueled by the holiday eggnog. VIX collapsed under 12 yesterday printing a multi-year low only surpassed to the downside by March's lows. There are no bears remaining in the market; they all gave up. Equities will likely stumble along in this low volume trading environment to finish out the year, but the expectation is for a dramatically higher VIX in the near future in concert with lower equity markets. The red circles are all market tops this past year resulting in the following losses in SPX points from left to right; -25, -75, -120, -25, -90, -80, -25, -30, and now. What do you think will happen?

The average is a selloff of about -60 SPX handles. Throwing out the lowest and highest the average is about -55. The biggest drop is the May top and sell off of -120. The minimum drop is -25. Thus, from the current SPX 1842 level, if it serves as the top, a drop to 1815-ish should be expected at a minimum and likely far more. Remember, the stock market has not properly corrected lower (due to the Fed and BOJ money printing) for over one year's time. Most any long position you are not willing to hold for several years should be thrown overboard. The short side is preferred moving forward.

A key market metric is the VIX 200-day MA now at 14.39. The bulls are happy and in control with volatility under the 200-day MA. Bears got nothing unless they move the VIX above the 200-day.  Keystone's algo, Keybot the Quant, targets 14.18 as the bull-bear line in the sand (thick red line) which will cause market selling if it is violated to the upside. 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.