Deleveraging is a nasty business. I am totally impressed with just how nasty it is…capital allocation is more based on forced liquidations than planned choices…this action in the market demonstrates that. In addition there is a high degree of complacency and continued and clear weakness in the EURO, Gold and Silver…important reversals seem set to spring their traps in these areas and will likely fuel many months of dissapointment for risk assets. Most important feature that hints at the suspect foundations of the moves in risk assets is the HUGE relative strength of the Dollar index which is only about 50 cents off its recent highs.
We are also in the symmetrical pattern target for the S&P500 that I posted in this post: Develveraging is not a very orderly process… and as you can see below, the VIX is not confirming the equity market highs thus far.
New bull markets in risk assets are NOT built on flimisy foundations like these.