In the current financial landscape, a palpable tension brews as markets lean towards anticipating an imminent Fed pivot, contrary to the central bank’s official stance. The prevailing sentiment suggests greed levels in the market are soaring to multi-year highs, as evidenced by the resilience of the S&P 500, even in the face of a pullback in the so-called “Magnificent 7.”
A noteworthy indicator of the prevailing market sentiment is the VIX, which recently touched its lowest level in almost four years. Further emphasizing the exuberance, a remarkable 51 S&P 500 stocks hit all-time highs on the same day, marking the highest number of record closes in a single day since April 2022.
However, a cautionary note emerges as investors might be underestimating the potential delayed impacts of what is being described as one of the most aggressive monetary tightening policies in history. Historical patterns reveal that changes in Fed funds rates, often with a two-year lead, have been harbingers of significant volatility events in equity markets.
The VVIX/VIX ratio is poised to hit the 2018 trend just as markets reach all-time highs, a scenario reminiscent of December 2019. Notably, this alignment kickstarted a two-month countdown to a panic-induced crash.
As the present unfolds, the question arises: Is history on the brink of repeating itself, ushering in a period of heightened market turbulence and potential correction? Investors are left navigating uncertain terrain, closely monitoring Fed signals and historical indicators to decipher the trajectory of the markets in the coming months.
It feels like greed levels in this market are at multi-year highs.
Even a pullback in the Magnificent 7 couldn't take the S&P 500 lower.
We expect a spike in $VIX soon.
Consider subscribing through the link below to see how we are trading this market:t.co/SJRZ4FrfLE
— The Kobeissi Letter (@KobeissiLetter) December 12, 2023
Pundits are calling this the year of the Magnificent Seven:t.co/RQC1A12Hy8
If the year ended today, that would be true.
It's clear that bulls have never heard of biblical irony. pic.twitter.com/YMvozUpzeR
— Mac10 (@SuburbanDrone) December 13, 2023
VIX just reached its lowest level in almost 4 years.
Today’s investors are underestimating the potential delayed impacts of one of the most aggressive monetary tightening policies in history.
With a 2-year lead, changes in Fed funds rates have often foreshadowed significant… pic.twitter.com/yTRUnf15oj
— Otavio (Tavi) Costa (@TaviCosta) December 12, 2023
Let's unpack this:
The Dow's all time high was Jan. 5th, 2022. I know, because that's my birthday.
Dow six years overbought (RSI).
Last Dec. FOMC was the high until July.
OEX new highs highest since…don't forget this year:
Jan. 5, 2022. pic.twitter.com/QSaoldEb7k
— Mac10 (@SuburbanDrone) December 13, 2023
The out of control melt-up continued today. Why, I can't say, because Powell most surely will pile drive markets tomorrow. Also, the only trillion dollar mega cap to confirm this Tech breakout remains Microsoft.
However, among semis, Broadcom is leading the way. pic.twitter.com/oOZdy1GdPZ
— Mac10 (@SuburbanDrone) December 12, 2023
"Vol explosion, Tech crash"
The same over-crowded trade. pic.twitter.com/xTUtUiw0OP
— Mac10 (@SuburbanDrone) December 12, 2023
Nasdaq is now at the same level where it peaked in 2021. t.co/oZg7QnHaEO pic.twitter.com/FrUsrxlxfN
— Financelot (@FinanceLancelot) December 12, 2023
European Stocks are the most overbought since 1999 pic.twitter.com/yoxKVqa3gh
— Barchart (@Barchart) December 13, 2023
51 S&P 500 stocks hit an all-time high today, the highest number of record closes in a single day since April 2022 pic.twitter.com/qyHYnQcUl2
— Barchart (@Barchart) December 13, 2023
VVIX/VIX will be hitting the 2018 trend exactly when markets hit all-time highs.
This happened in Dec 2019 as well, which started a 2 month descending countdown to the panic crash.
Is history about to repeat? t.co/EUXqUfnrZ9 pic.twitter.com/7nZbYwGxmc
— Financelot (@FinanceLancelot) December 12, 2023
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