8 Straight Down

The pundits like to bring out random statistics to state the seriousness or peril that the market is in.  We have been down 8 straight days, the last time since October 2008.  But they don't like to mention that the down days in this streak are microscopic compared to the down days in October 2008.  It is like comparing 8 straight paper cuts to getting hit with eight bullets from an elephant gun.

What has been noticeable is that the VIX has been vastly outperforming the inverse of the S&P.  In other words, option premium has been rising rapidly, more than one would expect from a couple percent down move.  Usually that is bearish short term, but more bullish intermediate term, especially when the rise in that volatility is due to a big event (like a presidential election).

Also, you have seen several days of high equity put/call ratios despite the relatively small down days.  That tells me many of the nervous investors are hedging with puts ahead of the election, which is a positive.

The base case is for the market to bottom before Tuesday's election, and then rally on the results in the intermediate term, whether it be Trump or Clinton.  If Clinton wins, you get rid of the uncertainty and have a predictable cookie cutter politician.   If Trump gets elected, you will have a short term reflexive selloff like after Brexit, but then you will have an equally violent rally when investors realize that Trump is actually more likely than Clinton to enact pro-growth fiscal policies and cut corporate taxes.

I did some buying near the close yesterday in S&P, and will look to add a bit more if we dip today.  Running with the bulls, at least for the next week or two.