Wednesday, September 16, 2009

Market Observations

VIX is failing to make a new low...and bouncing.

Looks like market is setting up a very emotional disconnection from reality. We need a big volume close over these levels to trigger further upside - not just stops being taken out and bears being squeezed. At this point, mutual funds have less than 4.2% of assets in cash. This sets up a scenario where when the market sells off...there are no more buyers to buy the dips. Clearly the market is hallucinating. The trick is to not get squeezed out before it falls over. Right now, targets for the Russell 2000 are in the area of 618 to 623...once we hit these...the reversal could be dramatic as the orgasm of cash being spent on inflation assets evaporates. Right now, buyers feel good because that's what seems to be working and everyone else is doing...but if it were to actually playout that way...I would be surprised.
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