While US equities have spent much of the past several weeks under pressure (the NASDAQ bio tech index has fallen over 21%, the NASDAQ Comp is down over 8% and the S&P500 is down over 4%), BofAML's Macneil Curry is concerned that the VIX index suggests conditions should deteriorate further before greater signs of a base materialize.
Since 2012 most tradable market lows have come only after the VIX has pushed north of 20%. It is currently only 17%.
In such an environment, US Treasuries should rally further. Indeed, US 10yr yields have broken below key resistance at 2.608%/2.632%, exposing the long term pivot zone of 2.469%/2.399%. The Japanese ¥ should benefit as well. The 200d in $/¥ is key (100.81) A break below would do significant psychological damage and force out many trend followers.
Chart of the week: The VIX is not where it needs to be
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While US equities have fallen sharply, the VIX index still shows signs of complacency. Historically, most tradable equity bottoms transpire after the VIX Index trades above 20%.
With it currently residing at 17%, the S&P500 can deteriorate further towards 9m trendline support / 200d avg at 1792/1761
Source: BofAML