XJO Weekend Charting and Chat - 11th August 2017, page-11

Complacency is an interesting word that has been thrown around since early in the year, often in reference to the historically low VIX. For years following the GFC investors were waiting for the next correction but almost a decade on it seems these fears have subsided in place of complacency. Contributors to this forum are well aware of trends and no doubt history repeats.

Interesting to note that in over a century, just over 3 years is the longest period without a 5%+ correction (currently 1.5 years) and about 12 years without a 20%+ bear market (currently 8.5 years and second longest to 88-00).

If Wall Street hasn't entered its next correction in recent weeks, it could not be far away. The ASX will no doubt follow and are already within a whisker of a 5% correction.

What could be the catalyst? Record low unemployment - surely this can only rise from here. Low inflation with interest rates rising - imagine the shock waves if the Federal Reserve put interest rates into reverse. FANG stocks - juicy multiples in the tech sector and it won't take much to tip them over.

In Australia - the RBA are joking if they think interest rates are going up any time soon. Low consumer confidence, low wage growth and a robust currency are all pointing to further sluggish growth at best for us. Never mind a housing correction, bank regulation and what a further drop in commodity prices might do.

Finally there's North Korea, China and trade. These types of fears are almost always present but they do add to this picture.