The Cold Reality of Winter

Tempting as it may be to call a bottom in the midst of another sizable gap down in the broad market, the truth of the matter is that stocks have largely ignored plenty of news of late off of which it could have rallied sharply, be it the emergency rate cut, the virus spending package, or even this morning's beat in the jobs report. While it is true that the VIX tagged 50 this morning, a level it has not touched in over two years.

However, the sheer depth and volume of virus headlines combined with various firms of all shapes, sizes, and locations indicating their business is slowing considerably means risk remains for an outlier VIX reading, perhaps into the 60s. 

But the main point is this: Unless bulls can firm up this tape we have another scenario with significant weekend risk coming up. Last weekend, bulls were able to answer the bell with a huge rally on Monday. Can they keep tempting fate? That is not a bet I want to make this time around, especially if we close poorly today. 

Updating the Dow Jones Industrial Average chart (note how the Dow and its big price moves seems to take on more significance during corrections and panic), below on the zoomed-out daily, you can see that last Friday's lows coincided with a truly significant price level from the last two years. It is more likely than not that we probe those lows again to see if they can keep holding.