Bear Mace: Volatility (VIX)

12/11/08 02:47PM EST
Every time this market has sold off this week, the VIX has not confirmed the newfound ideas of “risk management” that some of the market’s players are implementing. Some people were not cut out to be short sellers – that’s part of The New Reality.

Let’s analyze today’s intraday SP500 selloff versus the fear you should see in the VIX – there was none – nada – zero. The VIX is still down -3% here on the day, and worrying the dizzied bears like fresh fluorescent spray of bear mace.

The chart below outlines both the double top and the recent momentum breakdown in the VIX. At 62.22, I’ll change alongside those facts. The good news, if you’re long, is that those aren’t facts yet – the VIX is at 54, the bears are worried, and they should be. If the VIX breaks and closes below 48.86, I think you’ll be staring a SP500 bull of 1,036 right in the eyes.

Buy low.
KM
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