I like to keep things simple. And I also like to know the difference between fact and fiction. Humans are really good at fiction especially of the “it’s different this time” variety. So while the airwaves continue to be dominated by people that keep saying that growth will pick up, that markets are fairly valued and are ready to about go higher the emerging chart picture tells a different tale. My latest exhibit:
The $SPX versus its weekly 100 moving average (MA):
This chart is the latest in a string of macro charts that are raising red flags, other’s can be found here.
In the past these type of corrections, while scary when they occurred, have been healthy, even though each time they resulted in heavy FOMC action in lowering rates and providing fresh Fed liquidity. Unfortunately for markets the Fed is already over $4 trillion “in” with rates at record lows. So nobody really knows how a similar move may unfold in terms of impact. Can’t go much lower than 0%, although the ECB is eager to explore this option it seems.
Either way, most market participants do not appear all that worried as the $VIX continues to hover in the cellar. But history already tells us what’s next for the $VIX as I outlined here.
Yet some are eager to tell us that the ‘correction’ is already over and it’s clear sailing from here:
Well then, there you have it. All is well. Best of luck.