We are stuck in a market maelstrom!

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I have a very varied group of people as clients. Regardless of who you are, the latest violent ups and downs of the stock market have tested your mettle. That generally means you have stopped buying while leveraged folks are unwinding positions. This is contributing to the uptick in volatility.

You still do not understand the nature of the beast. A dose of reality is no bad thing. Memories of the financial crisis have faded. During 2017, stock market volatility was low, investors started to take bigger and bigger bets on borrowed money and speculators discovered a new financial instrument in the form of Bitcoin. All these were signs of a reckless over-confidence.

It appears to me that both the volume of selling and initial sentiment indications are pointing toward a bounce in the days ahead. I am not the only one telling you this. Elsewhere, Canaccord Genuity’s Tony Dwyer pointed to a record surge in the CBOE Volatility Index above 20 as a sign that investor anxiety are reaching “a tipping point.” 

Earlier Monday, UBS strategist Keith Parker said the selloff is “close to an end” as the size of pullback has matched the average retreat during periods of positive economic surprises, as is the case now. Evercore ISI technical analyst Rich Ross also sees limited downside as volume spike signaled “climax” selling.

In case you want to know, I am not doing anything. Fortunately, I do not have to choose between buying and selling today. I will wait a little bit longer. 

The explosiveness of a market, the speed at which it moves from calm to panic, as well as the dimensions of that panic are valuable sources of information to any students of the markets. Bloomberg’s Julie Hyman gives a crash course on the rise and fall of the hottest trade on Wall Street. Enjoy the VIDEO here.

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