I told you we would be DOOMED!!!
That's right, in Monday morning's post I said:
Unfortunately, it's too late for the Russell, which already blew through that line and is back at 1,050, where it MUST HOLD or we are DOOMED!!!
That's right, DOOMED!!!, and I'm not afraid to say it. Panic is in the air and the VIX hit 27 on Friday, just shy of the August high and that means people are FREAKING OUT and the markets can be very dangerous when that happens.
Now we will be watching the 1,000 line on the Russell and, if that fails – we could be looking at another 5% drop for the S&P – all the way to about 1,760 before the next time we'll want to play for a bounce. As I pointed out in my Morning Alert to our Members, none of this is a surprise to us as we called for cashing out when the S&P was at 2,085 back on August 13th (see: Thoughtful Thursday – Contemplating the S&P 500) and, I've repeated it every time the S&P hit 2,100 since.
Why? Because the VALUATIONS of the actual S&P 500 components did not support 2,100 for the index, that's why! This isn't rocket science folks – over time, value does tend to win out over price – and certainly over Technicals… At the time (8/13), I had concluded:
Over the last year, those overseas revenues have been in rapid decline and we're not picking up the slack at home so there is NOTHING here that justifies the S&P trading at an all-time high – especially when it's 10% higher than last year's trading range with a negative overall growth rate (mostly energy/commodities dragging it down).
So, upon further examination, there is no change to our stance of being short the markets at these levels which, on the Futures this morning, are 17,400