Of course my main concern is the bigger time windows coming due when we have markets that think they might want to challenge this year’s highs. With a VIX in the 16 handle we could very easily find a double top come October. I’m on Twitter regularly and one of the discussions we have there is the overall lousy sentiment when it comes to Europe and the economy in general. What confuses people is how could people feel so crummy about the economy and the direction of the country at a time when sentiment indicators like the VIX are so bullish? Something is not right about that. The truth is we do have GDP at 1.5% which could get Romney elected and we have controversy concerning Chick-Fil-A. I’ve discussed my feelings about CFA elsewhere but it does relate to the market. The reason the country is so at odds on this issue right now in terms of mass crowd psychology is the frustrating market that won’t commit either way. People are getting frustrated and taking their anger out on seemingly unrelated issues to financial markets. Don’t get me wrong, this is a serious issue but why now? You probably don’t see this kind of thing boil over during a great bull run.
So in terms of the market sentiment we have all this frustration boiling over at a time the VIX is down in the middle teens again. We know the VIX is an iron law to the market that when it reaches a certain point (10-13) the market is going to top. But how could it top when there’s so much lousy out there? It’s very simple, really. Markets don’t make very long term tops which such lousy economic conditions but they can make intermediate term ones when the VIX is as low as it is. But the game is still going until the clock hits zero. This week we’ll be 80-90 trading days off the high made earlier this year. It could give us a smaller high but by now you know what I’m point to. I’m looking at the big window in October which is where the clock strikes 12.