As we had been warning since last week, the recent market bounce was merely a technical one driven by short covering and oversold conditions. Yesterday the real trend reasserted itself with ferocity.
The VIX, what we like to call the fear indicator, has now surpassed two year highs, but rather than signal a bottom we believe this marks the beginning of a much larger sell off. Distribution has been mighty in recent weeks and the credit crunch banks are faced with looks to be the real deal; not just fear mongering.
A look at the monthly Dow chart tells us that this is a market that is in serious trouble. Whatever it turns out to be though, we are thoroughly enjoying this fresh injection of volatility.
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