A Couple of Bear Bedfellows

I like to see how many angles, how many lenses I can view the market through. Here is one of those angles, the correlation of the ratio between the more defensive Consumer Staples and the more risk ‘on’ Consumer Discretionary to the VIX.

Risk vs. reward in the top panel is with the defensive consumer sector now (although both are likely to decline if the correction resumes) and we targeted 30 as a likely low point on the VIX in an NFTRH update last Friday. Well, it got to 30.54 and that’s close enough. The risk vs. reward on the VIX is for volatility and against the complacency that investors have been showing lately.

While taking the rally a week at a time, we’ve been noting increasing risk with every leg higher. On Wednesday this public posted noted SPX at a potential termination point (62% Fib), but even if the next upside target of 3000 were to be the high, that did not change the risk/reward proposition. It sucked. Side note: I am not short anything and am using cash as my risk manager at this time.

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