Historic Volatility Tells Me This Stock Market is in the Middle of an Equally Historic Crash | Wolf Street

Historic Volatility Tells Me This Stock Market is in the Middle of an Equally Historic Crash | Wolf Street

But these moves are not surprising, according to our beer-mug dictum: “Nothing goes to heck in a straight line.” And just when you think the beer mugs are wrong, the market snaps back violently and proves them right. During the Financial Crisis, as stocks were crashing, the violent one-day-wonder-bounces were a sight to behold, with several exceeding 10% — in the middle of a crash!

This is typical of most crashes, especially now with algo trading being dominant, and with stock markets being equipped with “circuit breakers” that are supposed to prevent that kind of bottom-fell-out-event that we saw in 1987 (-22.6% on Black Monday).

I consider today’s event a bear-market bounce that confirmed that we’re in the middle of possibly a historic crash, given the already historic volatility, the historic level of stock-market overvaluation in February, and the challenges facing the economy and businesses, of which we’ve only seen the first signs. So today’s bounce was not a good sign in my book.

via Historic Volatility Tells Me This Stock Market is in the Middle of an Equally Historic Crash | Wolf Street

When someone this good pulls out of the stock market due to the absolute ‘craziness’ of what is happening, that is not a good sign.