The cost of insuring equity risk is on the rise, and this on the back of an increase in the cost of insuring sovereign debt of European states still trapped by a real estate bubble whose present, further bursting is more deeply sowing seeds of chaos across the globe...
Seeing the VIX challenging its 200-day moving average, one might look to the late-April period for some sense of possibilities over coming days.
Specifically, a bounce completing the market's correction of its initial move down from early-November top could develop here. It's either that, or the market breaks down, promptly sending the VIX above its 200-day moving average.
Today's breakdown at the open puts to rest the Elliott Wave count for wave ii (of five waves down from early-November top) put forward Friday. Some other corrective wave count applies.
Have no doubt, wave ii could be complete and wave iii could be in its initial stage of formation. Yet today's comeback and the present relative strength similarity to that at the same time last week (seen in conjunction with the position in which the VIX finds itself) suggests a bounce could be in store. Whether this completes wave ii, or serves to correct the first wave of wave iii remains to be seen.
No matter. The risk of a sharp decline going into year end appears elevated.
Lots of NYSE-listed issues remain in line to be slaughtered. Indeed, they've hardly been touched (demonstrating yet again the manner in which complacency has the majority holding long positions at a time when new money increasing its exposure simply is not forthcoming: a condition verily defining the market's entire advance off March '09 bottom).
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