XJO - Bear Posts only (Factors which might cause the markets to fall), page-8050

Yeah on the daily or weekly timeframes, stretched out over a decent chunk of time, things make more sense. My comments were more about smaller timeframes, sorry I didnt mention that.

The VIX is an excellent indicator to watch. 40+ implies serious volatility. We had a few edgy perioids in 2020, but nothing much since. You can see the complacency of the bulls during this late Santa Rally (aka Junk Rally) where it slid down from 25 to 18. Seems to be turning up now.




Any lever the Fed pulls, it wont take effect for 6 - 12 months. For eg, most of those Apple or Amazon workers getting getting fired will have severance pay, so they wont hit the unemployment stats for many months. As Kacey mentioned, thats if they even decide to go back to work. We have this new generation of "tang ping" in China, and "herbivore men" and Hikikomori in Japan.
People are fed up and tuning out. And we have such thing as "professional gamers"- yep a truly productive society alright!

This lag makes predicting the immediate effects of the Fed lever-pulls difficult. Thats why they have to "suck it and see", but because of this imprecision, theres a real chance they will overtighten, and really smash the economy. Then right as the end of the recession, when all the damage is done, they will ease when it is too late, and again, there'll be the lag effect..I believe history shows that traditionally that is how it plays out.. Whatever goes on, the fed is usually behind the curve.

@kacey
At its worst , the SPX PE ratio fell below 5 prior to 1920. No reason it could not undershoot to that level again if things get really chaotic during a crash.