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This weekly overlay of the VIX and the SP500 says pretty much all that needs to be said. The shorts we’re eaten by what we call the “Shark Line” this week.

January 2nd of 2009 will likely mark an immediate term capitulation of this correlation, much like that of November 20th, 2008. On November of 2008, the VIX peaked +52% higher than Friday’s close at 80.86. On that same day, the SP500 bottomed -24% lower at 752.

My immediate term overbought/oversold macro levels for the SP500 and VIX, respectively are now at $925.88 and 38.87. Don’t get suckered in at immediate term “Trade” bottoms or tops. That’s not going to make you a winner in The New Reality of 2009.

Keith R. McCullough
CEO / Chief Investment Officer