Show are four 4-year charts, starting the the Cubes (NASDAQ 100 ETF), followed by three other bellwethers: Google, the iShares FTSE/Xinhua China 25 Index, and the VIX (CBOE Volatility Index). See below for charts and commentary.
No need for much commentary here, as equities peaked about a year ago and have been making a series of lower highs and lower lows (i.e. trending down) ever since.
We had the first bear-market rally this spring, as shown. That ended this summer, when the second leg of the bear market began.
As indicated by the 90% downside readings linked to from yesterday’s post (here), the VIX spike to it’s highest level in years, and the CDS and other spread spikes discussed yesterday (here), sentiment is at levels often found at/near the end of panics.
Still, as noted yesterday, upside reversals and rally attempts are not caused by massive selling, they are caused by massive buying, which comes in when extreme value is perceived, at least on a trading-rally basis.
A series of 90% downside days and extreme sentiment readings have cocked the hammer, but the timing of the rally attempt is will become self-evident when it is time. Until then, just keep your eye on the birdie!