Another incredibly exciting day in the market as stocks crater out of the gate, recover some of those losses and then plunge even lower. Is Ebola really scaring this market that much? The recession in Europe and slowing growth globally isn't anything new. Is it the Alibaba Top? I don't think this sell off has much of an excuse. And that is what has me concerned through this sell-off.
Stock futures continue the sell-off theme since hitting record highs last month. Earlier this year the VIX look ripe to tumble under 10, now its poised to take out 30. A market pull back can do wonders for market sentiment.
We've broken key support trend-lines, but I would expect a sizable bounce at some point.
Here is what I am reading this morning:
$XLE was sharply pulling back in 2008 a few months ahead of the market collapse. It was telling market participants that weakness was around the corner. Anyone who took this as cue to exit longs positions was saved from a historic sell off in the stock market and a panicked revaluation of assets. It was, unlike the last 5 years, a great time to be shorting the market.
$TLT is a great proxy for the bond market. If it trades higher bonds are being bought, lower implies bonds being sold. Since the start if the taper bonds have embarked on a strong rally right along side stocks, defying logic that bonds and stocks should move in opposite directions. Recently this trend has started to break. Stocks are pulling back, but bonds are continuing to rally.
