Enormous complacency. No level of skepticism in the market. The CBOE Volatility Index (the VIX), which measures expected volatility in the S&P 500, recently dropped to its lowest level in seven years. At the time of this post the VIX just broke thru resistance at $12.50 suggesting a higher probability that volatility is on the rise. With so many having jumped back into this market for fear of continuing to miss it, the follow the herd mentality could accentuate downside moves in the market. Our primary risk barometer the NYSE Bullish Percent chart shows signs that as the Index’s have made new highs and the “Generals” in the market have continued to march higher, the soldiers have ever so slowly been leaving the field since May 2013. Investors unwilling to accept higher volatility would be wise to set stop losses to protect their gains.
Always consult an investment professional before making investment decisions. Nothing in this post is to be construed as investment advice. All investments have a risk of losing value.