April 16, 2010
If you’ve been following along here and elsewhere, you’ve seen the VIX steadily drop. The low levels of roughly 15 it reached just yesterday was a clear sign of investor complacency. All the other negative factors were in place for a market decline including: high PEs; many overbought measures including both high McClellan Summation Index and RSIs; a property bubble in China and threats to tighten; light trading volumes in U.S. markets on index price increases; the contradiction of high prices for Consumer Discretionary and Retail sectors versus continuing high unemployment; the zero inflation canard and so forth. Toss-in options expiration, strange disappointment with Google’s earnings and an SEC civil suit against GS and the ingredients were all in place for an “event”.
You know what hit the fan Friday as the bullish rubber band was stretched too far.
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