8. VIX Moving Average
The VIX (AKA the Fear Index) hit a multiyear high of 70.90, reflecting extreme levels of emotion in the markets. We like to look at this on a 50-day moving average
VIX Deviation From 50-Day Moving Average
Readings above 15 over the last 10 years have produced significant rallies. The present reading on this indicator is 26!
--1998 Reading -- Market Up +27% (three months later) and +36% (six months later)
--2001 Reading -- Market Up +22% (three months later) and +22% (six months later)
--2002 Reading -- Market Up +14% (three months later) and +19% (six months later)
If History bears out, this should be a good buying opportunity with a three- to six-month horizon.
9. Losses of 45%-47% in the major indices
The S&P 500 is down 47% from its peak level one year ago, the Dow is off 45%, and the Transports are down 38%. These are relatively rare degrees of loss. Other than 1929 for the Dow, and 2000 for the NASDAQ, these losses have set up a near-term upside move.
Specifically, this sell off is the third-worst decline without a 10% rally on record. According to Bespoke Investment Group, the two that were worse were June 1931 to October '31 (-42.5%) and March 1932 to June '32 (-51%).
10. 2008 vs. 2002
The following two charts show the 2002 lows and the current market. Can you tell them apart?
The first chart is 2002, the second chart is current as of Oct. 10, 2008.
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