Yes, lots of volatility. Lots of hair pulling and panic. Very little has changed. We are still working a buy signal - a very strong one that should carry us into the Summer, in what appears to be a major, long-term bear market.
At first, as I mentioned here, this was driven by sentiment being so negative. The market ground lower - some days, plummeting rather than mere grinding. Then the other indicators started to kick in…We had the difference between actual volatility as measured by VIX, and historical volatility, give us another buy signal last week.
You would have fared just fine through it all if you kept your eyes on New Lows, as advocated here EVERY letter. Though many don’t, thinking they can outsmart it, sidestep it, etc.
They pay the price. Don’t fight what the New Lows are telling you. FAFO. They aren’t always right but they are always right when it really matters.
Then the VIX futures 4 months back minus 7 months back, the “true” picture of sentiment, as I say, as it cannot be arbed away, showed extreme negative sentiment last week.
Then the coup-de-grace, a particular signal we get on options breadth, which has an incredible record historically, with the green lines being buy signals and ghe red ones sell:
As you can see, we got the buy signal late last week. So here’s our strategy going forward: