Stocks Outlook - Wednesday, August 8

Thoughts

VIX has made a short-term bottom. A short-term bearish factor for the U.S. stock market.

“In 2 weeks time, this will be the longest bull market in history”. This is not true

Heavy Truck Sales are trending higher. Medium-long term bullish for stocks

JOLTS went up a little but are still trending higher. Bullish for stocks.

1 am: VIX has made a short-term bottom. A short-term bearish factor for the U.S. stock market.

VIX has been getting crushed lately and is now below its 2 standard deviation Bollinger Band.

When this happens:

VIX usually makes a short-term bottom. So if you want to go long VIX, now is probably the time to do it.

The stock market faces a bit of short-term weakness (i.e. over the next 1-2 weeks). This “weakness” can take the form of a sideways consolidation or a pullback.

1 am: “In 2 weeks time, this will be the longest bull market in history”. This is not true

One of the silliest false narratives is “in 2 weeks time, the current bull market will be the longest one in history”.

For starters, bull markets don’t die of old age. Over the past 100 years bull markets have lasted longer and longer simply because economic expansions have lasted longer and longer.

More importantly, this “record bull market” is only a record based on a technicality. The conventional definition of a “bear market” is a 20% decline from the top to bottom using daily CLOSE prices. This makes no sense. There is nothing inherently different between a 19% decline (which supposedly isn’t a “bear market”) and a 21% decline (which supposedly is a “bear market”).

The S&P 500 did fall more than 20% in 2011: it fell 21% using daily HIGH and LOW prices but fell 19% using CLOSE prices. In essence, this “bull market” based on conventional definitions hasn’t lasted 9 years. It’s lasted 7 years.