Friday, August 14, 2009
How to judge the next decline's magnitude...
This is something that everyone agonizes over. Looking at the $VIX monthly chart, I am seeing some of the lowest indicator readings produced over the last 5 years. Also the 'Volatility Fast' indicator is at one of the lowest readings (most complacent) in the last 5 years. This makes it hard to believe the decline to come will be 'shallow'....(For those of you unfamiliar with the $VIX it generally runs as the inverse of the $SPX. Now bottoms here are tops, and vica versa.)
This piece by Sy Harding kind of supports the too much Bullish Sentiment/Complacency argument: