The bearish signals are flashing, with most indicators calling the top: from the CBOE SKEW Index being 3rd highest ever to the S&P500 looking most overvalued second only to the dotcom bubble if 2000. Add to that VIX now trading at a rarely seen 11.8. We might be on the verge of a quick unwind of the “Trump trade”.
“When the VIX does bottom in January, its average low reading is 12.2; today’s close was 11.9. That doesn’t guarantee that we’re at the lows on the VIX for the year, but given January’s propensity to represent an annual low it does merit your attention. And since changes in the CBOE VIX index are strongly (and negatively) correlated to equity market returns, this is a warning sign about the near term direction of US stocks.” – Nicolas Colas (Chief Market Strategist, Convergex)
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