An irreverent look at Wall Street
Too bad the VIX is still in the mid 20's. We are vulnerable for a market reversal at this point. You would think will all the great news about rate cuts and pie in the sky prospects, the VIX would go down like it did around the first of October. I guess that means that the market is no longer responding to rate cuts or prospects thereof and more downside is likely. Of course, two sides to every trade.
A wrong side and a right side. I prefer th elatter versus the former. We are not vulnerable to a reversal here. The VIX will go down, when the market is another 3% higher. Consider 250 trading days in a year. Assume 1.5% daily movements in stock prices. So we have 1.5%x the square root of 250 or 15.811x1.5%=23.7. The VIX should be in the mid 20's right now, because we have a Fed rate cute "decision" December 11. That has to skew the volatility. Last time you had 20 market days before the Fed decision on Oct 1. Now you have 7. I just keep it simple to a back of the envelope calculation.
The question is, "Why is the Fed cutting?" The answer is: The Fed Funds Target is being cut due to falling private sector debt demand and contracting liquidity. The Bulls in the stock market will someday realize this. I think it will take more layoffs for this message to get through.
Today's market speaks for itself. The financials, on the way to Armageddon, got raptured! The homebuilders are next!
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