VIX Drops below 100 day average

The VIX went below its own 100 day moving average on February 22. Since today is February 28, we should probably wait another 4 days of below average volatility before we call a bottom, but the market is certainly looking better. The actual bear market low was probably on January 18, when we first thought it may have occurred.

There is still plenty that can go wrong in the economy. Fundamentally, the property deflation needs to stop. The Fed has temporarily stabilized the banking system, but if assets continue to deteriorate via housing deflation, the banking problems could began to grow again requiring more big writedowns. That could put the market into another leg down. There is also a commodity bubble building, which doesn’t help inflation and hurts consumers. That will be the next big bubble to pop, but it could take years for that to happen since it just got started.

So, I am cautiously optimistic. My portfolio has recovered a little bit and I am actually ahead for the year, now. The market seems to be acting better on bad news, which is a good sign.