Frightening Data Points To Potential Market Panic & Fed Inaction

Yesterday, the Arms Index (TRIN) spiked dramatically to levels not seen since 2011 and nearly twice as high as last week’s “Black Monday.” The Arms Index is a way of measuring how balanced the stock market is, with higher values suggesting the market might head in a bearish direction sooner than later. As ZeroHedge describes it:

A sudden surge in the TRIN indicates a jump in trader lack of confidence, as everyone scrambles to either go long the 2-3 rising stocks, or to sell or short the biggest decliners, ignoring the bulk of the market.

Of course, the Arms Index is a purely technical indicator that stock speculators watch closely, but it coincides with a growing mountain of data pointing to frightening volatility in American stocks and major cracks in the rosy mainstream narrative of an economic recovery in the United States. International banks, investment firms, big-name fund managers, and everyday technical analysts have all been sharing insights into terrible data and trends the financial media has largely ignored.

The spike in the Arms Index is accompanied by a giant surge in the Chicago Board Options Exchange Volatility Index (VIX) last week, which shot up to levels not seen since the financial crisis. Just as its name suggests, the VIX measures dangerous volatility in equities, with very high numbers corresponding to periods of economic recessions. The VIX jumped into that zone last week.

Goldman Sachs acknowledged that this VIX level is alarming, but played it down, because the economy is not officially in a recession:

While extreme VIX levels periodically occur, our analysis shows that VIX levels in the high-twenties to low thirties for extended periods of time are rare outside of recessions.”

If all you read is the mainstream news, then you might be forgiven for sharing Goldman’s assumption that the US is not in a recession. After all, the ADP National Employment Report was released this morning, and what do you know – another 190,000 private jobs were added in August.