If You Only Learn One Lesson From This Sell-off (Learn This One)

The recent sell-off in the market is among the worst 10 sell-offs since 2010 (see Chart 1), which means a rebound cannot be too far away. The all-important gauge of market skittishness, the $VIX, has not exceeded the level of 50 identified as the peak in my previous post, and has now closed below the five previous closes, implying that the most intense selling panic is probably over (see Chart 2).  The bottoming process is not complete, and may take various forms, and depends on  whether we get a "V" bottom or a re-test of the lows over the next 1-4 weeks (as in 2015-16) or longer (2010, 2011).   The all-important lesson for us regular guys and gals: Never Short Market Volatility.

  Chart 1: The 12-day rate of change of the S&P 500 index reached the lows observed in the 10 worst sell-offs since 2010. < p class"entry-more-link">Continue reading You Only Learn One Lesson From This Sell-off (Learn This One)" »

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