Easy To Slip

Keep your seat belt fastened

Little Feat was one of those bands that coulda woulda shoulda been bigger than they were. But it was the 70s and there was simply an oversupply of drugs and alcohol.

It’s so easy to slip, it’s so easy to fall. And let your memory drift and do nothin’ at all.

That’s what Lowell George was feeling in 1972 when the band released Easy to Slip on their second album, Sailin’ Shoes. Feels apropos for our current market environment where the leaders are being toppled and the day-to-day volatility has increased pretty dramatically this month as shown below for SPY and QQQ.

And this recent mishegas has also shown up in the volatility complex as reflected in the VIX Mix. Yesterday’s equity market ugliness shaved another 19 points from our composite, taking it right down to the borderline between Neutral and Bearish. We went from four bullish components to zero while the bearish count rose from two to eight. Not pretty at all.

That was also enough to cause or 10-day moving average to reverse course and head south. Too many uncertainties in the world right now and markets hate that. Investors deciding to lock in gains and take some money off the table.

At times like these, we like to use VIX and the VIX futures as our temperature gauge. As we prep for markets to reopen, there is a tiny bit of improvement from yesterday’s closing levels. VIX at ~ 19 implies average daily moves of just over 1% for the S&P 500 and that’s roughly in line with long-term averages. The futures are in contango but a little flatter than we might like.

Net of all this is that you can’t be surprised if this recent turbulence hangs around waiting for news. Today will be earnings from chipmaker Micron. And that Middle East peace process continues to hang over the market. Some clear resolution would be very helpful and failure would be crash inducing. So keep your seatbelt fastened for the time being. It’s still too easy to slip and fall.

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