S&P 500 vs. Volatility Index: Complacency or Capitulation?

Tuesday, September 16, 2008 | 12:15 PM

A few people have asked why I am not more enthusiastic about any bounce off of these technical levels. The simple answer is that we are still working our way through economic, credit, fundamental earnings, and and valuation issues.

The bounce is from a technical perspective, and recognizes that nothing goes in any one direction for ever.

Consider the market from a psychological perspective: There is certainly concern and fear out there -- down 500 points on record volume cannot easily be waved off. But there are lots of other measures that simply haven't pinned the needle.

I need to see these measures go to eleven, to make me really bullish.

Mike Panzner adds: "While some are saying that yesterday's price action smacks of "capitulation," the volatility index tells a slightly different story. In fact, at 33.61, the CBOE OEX Volatility Index (VXO [or the old VIX]) has not even reached the January or March highs of 39.02 and 37.17, respectively."

S&P 500 vs. Volatility Index: Complacency or Capitulation?

click for ginormous chart
chart courtesy of Michael Panzner, Financial Armageddon

Tuesday, September 16, 2008 | 12:15 PM | Permalink | Comments (51) | TrackBack (0)
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By my calculations, the market (S&P 500) hasn't been cheaper in any of the last 16 years on a valuation basis. I calculate Price/7-Yr. Moving Avg. Earnings. We're pretty close to 15 right now, which even Ben Graham considers a reasonable buying opportunity.

Posted by: Adam | Sep 16, 2008 12:27:06 PM

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