The End is NEAR!

No, we're not talking about the end of the world; we're talking about the end of the market crash.  There are no certainties/guarantees in anything, but the OEX Option Volatility Index (VXO) closed today at 49, eclipsing our "magic" level of 44.  This is a pure unadulterated PANIC index, and in its 25-year history, it has had these initial upward penetrations of the 44 level on 9 different occasions.  The only time it didn't mark "essentially" the end of the crash was on December 18th, 2008, and on that occasion, the next few weeks continued to be very weak.  Yet, on those other occasions, in the midst of intense panic, the VXO essentially marked the bottom of the crash.

So the bottom line I suppose is, if this is a threat that could be another possible 1929-32 Depression as September 18th, 2008, was, then we have much more on the downside.  But if it is a panic like any of the other 7 times in the last 25 years, then today's stock market crash is very close to being completed.

With the monetary liquidity as ample as it is now, with corporate cash at unprecedented positive levels, with $8.3 trillion sitting on the sidelines in money market and savings accounts, with many of the economic indicators saying the 2nd quarter soft-patch is starting to ease and employment gains are on the way, with the S&P 2nd quarter earnings up dramatically, with the Fed committed to furnishing ample liquidity, and with the forward P/E selling of the S&P 500 at a lowly 11, we opt for today's signal from the VXO marking the ending phase of this market crash.

I wish I could give you a guarantee that this is THE END of the market crash.  I can't, but I can say that based on 25 years of tumultuous stock market crashes, even for the one in 2008 that didn't work, long-term investors were greatly rewarded for listening to the VXO.  In almost all cases, you still had some more sweating to do, but the action that was created by these instances of panic created a better environment for economic and stock market actions in its wake

Click here to read this evening's complete Market Comment.

Don Hays

Please see important disclosures at the bottom of this page.