VIX has dropped sharply
While certain sentiment indicators are bleak (contrary bullish), like the Investors Intelligence (and AAII, NAAIM, etc.) survey by way of Yardeni…
…the VIX is more of a sentiment pressure indicator and it is grinding upward, but currently on a sharp pullback.
The way I view this is that the pressure comes in the form of an uptrend in the VIX since Q4, 2021 that diverged inverse SPX (as SPX made a new high in January, driving the inverse to a new low). VIX is now pretty much doing what inverse SPX is doing, which is declining (market rallying). But the problem is the potential new uptrend shown in the chart above. Risk of a market pullback has obviously increased since we projected this bounce off of unsustainable, even terrorized sentiment.
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