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The final quarter of 2018 spoiled me. It was fantastic. The last three weeks have reminded me what a vicious market feels like. Yuck.
I’m not alone in this, however. I just peeked at my Twitter feed (as I approach 20,000 followers – hurray!) and there were plenty of pleas for some encouragement. Well, I don’t want to “spin” things just for the sake of encouragement, but let’s look at a few principal charts together.
First and foremost, let’s observe the fact that over 50% of the $VIX has been blown to smithereens. Looking at the moving averages, it seems to me we have once against returned to the level of volatility where we could spring higher, rubber-band style. Even if we weaken further, I consider a level of about 16 a fairly reliable base.
Leaving aside our usual inclusion of macro fundamentals and market
ratios, today let’s take a simple technical look at the S&P 500 and
As the US stock market was becoming deeply oversold (and over-hated,
sentiment-wise) in December we planned for a holiday seasonal bounce,
which finally arrived with the immediate reversal after the Christmas
Eve massacre when the machines (and a few human casino patrons) drove it
to its downside climax. The bounce was almost a certainty, given the
sentiment backdrop of the moment.
My decision on December 26th of last year to dump virtually every short I had, buy GUSH, buy FAS, and short bonds, was the result of some of the most shrewd, most clear-headed thinking I’ve ever done.
In contrast, my impatience and eagerness to jump back into the world of bearishness, having had such a great quarter in Oct-Dec, was one of the worst. Indeed, in my own words from this post of December 26th: