I see quite a few analysts and newsletter writers extrapolating a big selloff in stocks based on the low level in the VIX.
Look at the period from 05 to 07. The VIX spent long periods of time under 12, and even as low as 9. As usual the typical analysts are again making a mistake extrapolating what has happened in the recent past forward into the future.
This is why they missed the 7 YCL, and thought we were in a bear market.
I can’t stress this enough, the tools that 90% of analysts and newsletter writers use are worthless for calling these turns. They will miss it every time, and apparently they will never learn from their mistakes, but just keep making them over and over. In order to succeed at a high level in this business, one has to adapt as quickly as possible to evolving markets.
You can’t stay stuck thinking that all markets follow perfect EW counts. They don’t.
You can’t stubbornly depend on chart patterns. They morph and evolve.
You can’t depend on indicators. This one is probably the most useless. Everyone has, and sees the same indicators. Do you really think you can get an edge watching the same thing as every other Tom, Dick, and Harry?
And yes cycles and sentiment also evolve. Cycles stretch or shrink depending on QE or market manipulation. Sentiment levels that would have turned the market last year often need to be more extreme this year.
This is why many cycles analysts miss the turns as well. They are stuck believing that we have free markets, so often they end up sitting on the sidelines waiting for a second leg down into the natural timing band for the cycle low … that never comes, and they miss the move.
You have to adapt in this businesses. Those that can do it quickest survive and prosper. Those that are stuck in the past go extinct.