There’s still lots of work to do with this correction. At a VIX of 25 there’s obvious still way too much complacency floating around. Maybe if FB falls to 30 people will really start to get unglued and realize the seriousness of the situation. It probably wouldn’t do that but it can easily drop to 34 which is 10%.
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But the weirdness of markets is that they don’t go straight up or down. It’s time for the Greenback to pull back which means markets could catch a break this week. The US Dollar has been on an unsustainable path and needs to consolidate. In early trading on Sunday night the Dollar was already below the first ridge of support which means it should trade down to at least 80.50. Not a big deal you say but it will be the biggest pullback since its rise at the beginning of the month.
Click chart to enlarge
Let’s be sure we understand this. The fundamental people will always be right about owning a good company however when it comes to anything in life, it’s all about the timing. Markets are going to do what they’ll do because there is a season for everything. Go against the tide, it isn’t going to work. I’ve spent the better part of the last 3 years subscribing to my bullish symmetry at the bottom. However, we are not in that season right now. We started being concerned about a low VIX number just before Christmas when the VIX did not rise when the market sold off. It took time to play out but it did put a ceiling on things. Now we experience blatant complacency at the exact worst time for it. Everyone wants to know when this correction will end. There is no magic bullet or exact number I can give you. But I can tell you this, there will be some market symmetry attached to the final low and will happen when fear levels rise above the creek. It won’t happen until then but we’ll recognize it when we see it. Even as we should have an improved week technically the end is not here.
Bono supposedly made more money on Friday than he has in 30 years of being the U2 front man. I’m happy for him because it shows our system still works. But the market goes on and the rest of us should be happy the VIX didn’t retreat which prolongs the agony or should I say complacency. It’s the best the bulls are going to get right now.