 |
Armageddon headlines are suddenly back in vogue. Not a single positive story to be found on the Marketwatch front page, and some of the TV media coverage is becoming hysterical. At last! |
We began to see signs of true panic today, with a major spike in both the $VIX volatility index and the Equity Put/Call ratio. This bodes well for a sharp rebound in coming days, which I fully expect to be met with more selling in the weeks to come.
True market crashes are rare, but their lifecycles tend to be remarkably similar:
- Panic low
- Violent rebound
- Prices fall and retest the panic low, as investors who failed to sell near the top grab their opportunity
- The panic low is broken (usually)
- Pattern repeats, and price works its way lower until stabilization occurs
- Multi-month buying opportunity
Folks, we can't even be sure we've hit the panic low yet. Here is the updated Put/Call chart, which is starting to look positive...
The Federal Reserve board will pronounce on Tuesday - let's see if they can spark a 'we're saved!' rally.
A rebound in the next few days which retraces to anywhere near the March lows (1240 on the S&P500) should be seized on greedily if you're looking to sell or go short. But I don't anticipate looking for a buying opportunity until we go through the retesting process, and that could take a while.
Meanwhile, I'll leave you to feast on an enlightening interview with Kyle Bass, one of the few investment pros who saw the 2008 financial crisis coming way in advance - and made his fortune in it.
Here, he tells it like it is.
(Flash Player required)
