The watchword during much of the current sell-off has been complacency.
We had major denial as to the breadth and depth of the problem. Remember back when Housing issues were "contained?" Do you recall that sub-prime "did not matter?" That the "Goldilocks economy" was just fine?
Those phrases will go down in history as aphorisms of the clueless, excuses by those who should have known better. Hopefully, someone will hold the perma-bulls, the money-losers, the idealogues, accountable.
Meanwhile, as the market panic has now increased to palpable levels, creating a tiny ray of hope: Fear has returned.
As the VIX chart below shows, there is some measure of panic. We have now spiked above all of the recent panics of the past 2 years — but not nearly as much as we have seen in the 2,000, mid-2001, and 9/11. Those 3 prior panics set up the 2002/03 lows 2 years later.
The only question for traders is whether or not this sell off is closer to the ones seen over the past 2 years (in which case you can buy ’em here) or more like the 2000- 03 period (in which case we have more selling to go).
VIX Chart, 2000-08