Jim, Barbara, how can you guys call the VIX and Trin oversold? Until yesterday, the VIX was getting to serious lows (complacency) and it's still below 25. It hit the 30s for short periods early January and late December and spent most of November and late October bouncing from 30 to 37 or so after hitting the 50s briefly. I just don't see fear in the number yet. Meanwhile, the trin, Jim, has barely moved over 1. Today's 1.15 was the highest in two and a half weeks and Trin-5 hasn't even cleared 5.0 yet (I have 4.93 for today) much less approached 6.0.
Bottom line is, even after 400 points in the Dow and 40 in the S&P, there is very little fear in the markets (IMO, of course). The internuts are barely off their highs (though some seem to be making beautiful double tops). Of course, with everyone conditioned to buy the dips, I imagine there will be massive salivation when the bell rings in the morning. But, with earnings season not going real well and getting into the later and generally more disappointing reports, I think it is finally starting to occur to people that there will be no miraculous recovery in earnings in the second half. Another 120 or so points in the Transports and they will reconfirm their downtrend (can you say "recession"?). Interest rates are not going appreciably lower without some significant slowdown in domestic demand, so that won't save the market either.
Suddenly, the bulls look down and see the supporting fundamentals of rising earnings and falling rates are gone, and they are standing over 30 PE points of air (OK, 29 now). Then, we might see some fear. There is a ledge sticking out of the cliff face about 1/3 the way down from the top. Perhaps we can catch a few tree roots along the way to slow the fall (enough slowing perhaps to allow the Fed to ease before we are in a recession). The internuts, OTOH, are hanging in air much higher up and don't realize it yet. Just like www.WileyCoyote.com, they will hit the canyon bottom in a cloud of dust. Beep beep!
Bob |
