A 50% jump overnight! As I said last week when the panic strikes, it can cause the volatility to jump 50% in no time. We just got that! VIX shot high by almost 50% on the passing Thursday, which has caused a lot of people into a depressing mood. Did you already have some insurance in place before that? If not, you must be very painful to experience this. So are we out of the woods yet? No, definitely not! You see, while it feels like very severe of a plunge, the decline is even not yet 2% below the SP all time high. I think we are likely seeing a more severe correction in the range of 5-10% in the next couple of months. So if you are itching to do bottom fishing for long term, think twice. Quite possible you will get a much better chance in the weeks ahead.
Having said that, nothing goes a straight line, either up or down. Actually the sudden plunge of the market has caught most of the people off guard, given how complacent most traders were before the hit. This is feel-like bloodbath has caused a rather significant oversold at the moment and the VIX has been extremely overbought. The CNBC talking heads all sound very worrisome and depressing about the market. In such a depressing sentiment environment, the next big move is often going up, not down. Barring any black swan flying out from North Korea over the weekend, I bet we will see somewhat strong bouncing back very soon, probably starting early next week. I want to buy, not sell right now, but only for a short period of time!
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