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Not only is volatility back, but now it’s obviously back.

We're Just One Bad Jobs Report Away From Significant Volatility - z rough

We’ve had a huge move in volatility that’s been associated with multiple factors, not the least of which is global growth slowing fully-loaded with Europe, China and the U.S. slowing all at the same time paired with the epic political Gong Show in Europe with Greece leading the charge. The more you get of all that back-and-forth, the more volatility you get.

Instead of naval-gazing at how many points the futures are up or down, watch the breakdown in either the Trade or the Trend line of volatility. The intermediate-term trend (which has been bullish for volatility) has been well supported now for over a year. That’s a year. Not a week or a month... a year. 11.34 is the intermediate term trend line of support for volatility.

Then you have the intermediate-term breakout line currently at 14.21. The VIX closed at 18 and change on Tuesday and we’re going to go back and forth and back and forth.

As I’ve said multiple times, we are one bad jobs report away from seeing significant volatility in US equities market.  Don’t forget we’ve seen significant volatility in U.S. equity markets whenever the growth data has been decisively negative. “Decisively negative” has happened multiple times, don’t forget. And that’s really what the late-cycle bulls have to see—they have to see something that can’t be obfuscated.

We're Just One Bad Jobs Report Away From Significant Volatility - zz 06.30.15 chart

Incidentally, at the end of a cycle being "good" is what you should expect from the economic data. That's the point. It's when it's about to go from “good to bad” that you really see the drop off. What you tend to see is the breakout in volatility associated with people being too long or too complacent on U.S. equities.

As far as U.S. equities are concerned, I would simply point out that halfway through the year, this is the worst start to the year we've seen in five years. Yet you're still seeing headlines from Bloomberg saying that Wall Street economists are looking for a fantastic recovery in the second half of 2015. Well, it better be. Because the reality is that it probably won’t be. These people have been routinely wrong on both their growth and S&P-500 forecasts.

We expect them to continue to be wrong.

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