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.

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32 thoughts on “VIX

  1. gent25

    True that.. but looking at your own chart in those 2 periods circled the VIX doubled from around 10 to 20+ within months not years.

  2. ras

    True, there is no perfect indicator. What counts is plurality. When every thing is kicking in the same direction, that is w hen max moves occur. All major indices are now labouring on inter hourly charts , like a car going uphill with rapidly depleting gas tank. Profit taking will inevitably set in major us market indices sooner than later. When price momentum is fading, it is time to act.

    PM sector could be stuck in a trading range until bpgdm pulls back to a decent level. This could take longer than fomc meeting next week. Time will tell.

    1. Gary Post author

      I would argue the opposite. It is still very early in a new intermediate cycle. To expect a big correction this early is a classic example of using the wrong tools. I wouldn’t count on any kind of significant pullback until the cycle count reaches 30+ days.

      Today is day 18.

      1. ras

        I am not a cycle expert. I just follow price momentum. I am long only when price graph displays a nice slope up. I wind up longs when price graph looks like a flat rink for 3-4 days, like it is now, no woomph behind price. No ldea about amplitude or duration of correction. Let the market do its stuff. I am on the sidelines. No rush here.

  3. gent25

    $USD – if the FOMC is hawkish next week both $USD and gold could go up at the same time…

    1. Gary Post author

      Yes oil is moving down into an intermediate cycle low. As I have explained before, intermediate cycle declines must break the intermediate trend line to get technical traders on the wrong side of the market before they bottom.

      A trend line break isn’t necessarily bearish, it means the conditions have been met and the ICL can be struck at any time.

  4. Steffmeister

    I’ve placed a bearish bet on S&P500 today 🙂 wish good luck Gary !

    x10 leverage, lets see how it plays out …

    Two long term cycles shows us that markets has topped for now.

    1. Gary Post author

      A classic example of a trader believing he can outsmart a bull market. I would urge you to learn from my mistakes instead of making them yourself.

      Remember Jorgy? He destroyed his portfolio with a triple leveraged inverse fund and you want to go 10 times leverage. What are you thinking?

      1. Gary Post author

        Even if you were to win and make a little money on this trade it would just reinforce a bad habit that will end up costing you a lot more money in the future.

        1. Steffmeister

          Lets see how it unfolds, give me two weeks. I am only doing this when I am pretty sure it will go my way. Last time was August 2015 initially I was down 2-3000dollars, but in the end I forked out 25000dollars.

        1. jreality

          I have a feeling that you are throwing your money away by trying to fight this market. You may get lucky, but you will give it all back (and more) eventually if you think shorting is going to enrich you.

          1. Steffmeister

            No this is just for fun, less than 3% of my portfolio. I am long Gold&Silver miners since last summer and they are doing just fine.

            Look at
            Victoria Gold
            ATAC Resources
            Brazil Resources
            K92 Mining
            Gold Bullion

            Silver Range Resources
            Silver Bull Resources
            Kootenay Silver
            Great Panther Silver

            I also have one uranium company
            Uranium Energy

            and two lithium
            Pure Energy and Noram Resources

            Some of them are up close to 1000% since the low, I’ve got plenty of riskfree “play-money”

            I am skipping oil, thats a thing of the past haha, my friend just bought a Tesla, a really cool car !

  5. Steffmeister

    FOMC meeting 26th-27th of July

    High levels on geopolitical violence 27-30 of July, Germany is already suffering, ax hacking islamist a couple of days ago and shootings in a shopping mall i Munich today, several killed.

    1. Gary Post author

      And any of that makes any difference with every Central Bank in the world pumping trillions of QE into the markets?

      1. Steffmeister

        Such events are coordinated with events in markets, it affect traders around the globe yes. To make bad decisions. No mine is not one of them haha

  6. crawfordnews

    Something is way out of sorts, if the markets are the CB’s, why are they pushing so hard, the market keeps ramping, the number releases are all so good as to be unbelievable, I keep coming back to the fact that they are getting ready to start pushing tightening again, or even a surprise rate increase. Oil down, attacks, social unrest, coup attempt, Trump nominee, Brexit, etc, etc, Something is getting ready to break loose, I can’t think of any other explanation why the big push, getting some room before the event.

    I added more vxx 1/2019 calls with avg .75

    1. Gary Post author

      They are pushing hard because propping up the stock market is the only way governments can avoid a recession.

  7. Gary Post author

    Who was it that told me that Soros was buying puts and that meant stocks were going down?

    I said Soros was going to be wrong……

  8. humbled

    read somewhere that S&P500 to top somewhere in the region of 2,000 (+/-20 pts), then head down to 1,700 to complete the multi-quarter correction. Timing band for that low circa end November..

    That makes the 1,810 low seen months ago as only halfway low or something?
    Only after that 1,700pt low then new high and new upcycle kicks in thereafter.

    Any thoughts on that? thanks ~

  9. Steffmeister


    That is pretty much what the skilled elliott wavers think, we need a bigger wave 4 to kick in the final wave 5 in this bull.

    Then we have the crash-scenario dudes like Bo Polny and Greg Mannarino, but I dont know about that. I think we need a final blow off wave first.

    Do not put to much confidence into central banks, a highly skilled analyst wrote this last week:
    “then we have cycles so big and strong that they will crush centralbankers like a bug on the pavement”

    1. Gary Post author

      They will just keep missing it over and over.

      The 7 year cycle low bottomed back in February. The rally out of that bottom was one of the most powerful breadth thrusts in history, just like the 09 bottom (which was also a 7 YCL) Maybe by the time the S&P reaches 2500 or 3000 these nitwits will catch a clue.

      When the Nasdaq follows the S&P and breaks out of that 15 year consolidation it is going to be a gigantic move over the next 3-5 years.

      1. Steffmeister

        Maybe we are about to create a bearish megaphone pattern in S&P 500 ?

        Ok a cyber-burrito bet Gary. If we do not break 1810 before the end 2017 (ok I am pushing it but you said 7year low) then you have won hands down and I may even sign in for a subscription 🙂

        I think we are about to visit the lower end of the sideways trend channel created a year ago, sideways is the new up !

      2. ras

        Let us hope so, in which case there will be many opportunities to implement buy on dip tactics. 3-5 years is a very long time.

  10. humbled

    this will be a chance for “live” education in market analysis… seeing how market behaves and plays out the rest of 2017.

    also read that megaphone pattern can be either a or formation, so guess we have to see ?

    see how it all plays out.

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