Finally today the VIX gave a clear signal on market sentiment and the likelihood on the direction of the market. See my previous blog on the VIX pattern showing the signal.
Today was a confirmation day with the VIX rising to 43.79. Stocks that benefited the most from the recent bear rally will be hit the hardest. Namely, financials. It comes to reason that so much optimism and good news in the banks can soon fall apart with any sort of negative news around M2M, corruption, uptick, earnings, corruption. Did I mention corruption?
I don't wish ill-will on anyone. But Chris Dodd and Tim Geithner need to be thrown in jail. It will be difficult, if not impossible to indict Paulson and Obama in this AIG bailout scandel, but Dodd and Geithner are obvious caught with their hands in the cookie jar. Both should be out of the public sector within 2 months.
While todays move in the market seems minor compared to the recent runup, it was significant to draw the bear back into the game and move market sentiment back to bearishness. Bulls are doubting some of the recent news and have to take profits. I congrat the bulls on the recent run and holding on so long. But the odds are clearly showing that the bear should take over again at least for the short term. I am looking for a trace back to 750 and if that breaks, to 732. If that breaks, 680. More than likely, at 750, we get a bounce. For now, you should be accumulated on the financial shorts once again. Not all in! But you should have enough that you can sleep at night and enjoy the profits coming up.
That said, this is a news driven market. The fed has shot all of its bullets. FASB is trying to shoot a bullet but seems to have come to a gun fight with a knife. The treasury is really the only one loaded for bear right now. But does Geithner have the guts to pull the trigger? He reminds me of Barney Fife trying to load his one bullet into his gun as the robber is getting away.