S&P 1170 Revisited

As many of you know, I'm generally an optimist. Yeah right, you may say to yourself. That's true - recently, I've turned increasingly bearish on the US economy.

Today, there's an article in Bloomberg that only adds more fuel to the fire that's burning our portfolios. The master, Warren Buffett, has spoken. And, he's not optimistic. In fact, "he's concerned about ``stagflation,'' or slowing in the U.S. economy while inflation accelerates," reports Bloomberg. You can access the article here.

Of course, Goldman today downgraded C and GM, just as they hit multi-year lows. C's new target is $11. That's right, $11. Wow. This, by the way, was after they upgraded the financials in March (post-Bear Stearns). So much for the big dogs that get paid muchos deniros. Indeed, f- Wall Street.

Let's take a look at a couple of charts here (thanks to stockcharts.com). No, it's not about technical analysis, it's about psychology this time. And what I see is bad, bad news. I have two charts: the first, is the Volatility Index (VIX) and the second is a S&P 500 ETF (SPY).

The VIX is a gauge of fear. As you can see, as the market has fallen rather precipitously recently, the VIX has not spiked like it did a few months ago as we touched these lows. Indeed, it seems to be true that a slow death is a painless death. We're like frogs in boiling water - we'll be dead before we know it. In addition to this semi-complacency, the S&P keeps breaking through major support levels. The next test is 1270s. If we break this, ladies and gentlemen, 1170 is a possibility. Remember 1170? That's right - I talked about it several months ago.

So, anyway, what I see is disturbing. There's still a lot of hope that the market will recover, while it keeps going down. This is a bad sign. What you want is for market participants to throw in the towel, be filled with fear and run away. They haven't done so yet, which only means that they will... one day. There are way too many oil bears out there, while oil simply keeps going up. We need oil bulls for the oil bubble to pop. Inflation is a concern. Economic growth keeps choking. Election uncertainty looms. All in all, stock some canned food and pray. That will serve you best.