Where Is the Fear?

Where is the fear? The Dow Jones Industrial Average has dropped more than 1200 points from the top, and more than 600 points in a week, yet there is a surprising lack of consternation. Volume is not high, suggesting little panic. That is reinforced by the unusual action in the Market Volatility Index (VIX). Look at the second chart below. One would expect such a slide to have produced high numbers, and, hence, a down move on this inverted scale chart. But that has not happened. Moreover, the Arms Index numbers, and, as a result, the shorter-term moving averages, are not getting dramatically oversold.

A decline of the current magnitude is usually not ended without capitulation. Big Arms Index numbers, a jump in the VIX, high volume and big trading ranges would signal capitulation. So, for now, it is difficult to see any reason for a decent rally to get going. We have been correct in anticipating this drop. Let's not give it back by trying to second-guess a rally that has not yet been signaled....256 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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