Last week, we saw some big selling in the US stock market, and even crashes in some stocks, like INTC, which fell over 20%.

This morning, DOW futures are down over 600 as I write this.

Everything is down and it is crypto that is down the most. Bitcoin fell below 53,000, falling 14%, and Ether is down over 18%.

Crypto kills portfolio, like kryptonite, during market drops and corrections.

It has always done that when the Nasdaq drops, but this time the Bitcoin gurus claimed it would be different, denying that what always happened had any meaning at all.

They are wrong again, but the real question now is will this market decline end with this panic selling we are starting to see?

On Friday, the VIX “fear index” jumped all the way up to just under thirty, to reach its highest level since March of 2023, when there was a panic in the markets over crashing regional bank stocks.

And it’s continuing on the open today.

This time the news event that drove the selling were poor July employment numbers, which suggest that the economy is slowing down.

Bond yields plunged too, to trade as if a recession is coming.

Highly valued stocks are vulnerable to selling at any moment, and so called “AI” plays got hit hard, along with big cap tech stocks like AMZN. The most speculative stuff (crypto) falls the most, but this morning NVDA is down 5% and so is META. So called “AI” plays are getting hit hard.

What the VIX does is measure the premium that options traders pay for volatility on the S&P 500 options.

It tends to spike when traders panic and scramble to buy puts to hedge long positions.

It is an indicator of fear in the markets.

We have been seeing orderly selling in the Nasdaq now since early July, in what has been a rotation out of tech stocks into sectors that benefit when interest rates are lowered, but on Friday even a lot of those sectors fell hard too.

There really was across the board selling and this morning it spread all over the world.

What turned into an orderly selling dip turned into a panic on Friday.

That’s what the VIX spike represents.

It had been trading below 20 all year and as long as it traded below that level the selling in the market and was orderly and really it was more of a rotation with money going out of tech, but when the VIX went above 30 last, last week, the selling turned into panic.

The VIX could go higher and levels in the 35-40 signify extreme panic, but panic selling does bring key bottoms.

The good news for stock market bulls, is that panic selling, and VIX spikes typically happen at the end of corrections and declines in the stock market.

We are likely to see some more wild swings to start this trading week off, but with this VIX pike the decline should end. By the end of this week we should see the stock market regain it’s footing.

Even if we are headed for a stock market bear market, or actually have already seen the top in the markets this year, I would still expect a market rebound after this panic decline ends.

I expect another rally will happen into the next FOMC meeting in September, as buyers front-run the first interest rate cut that the Federal Reserve last week promised to deliver.

The higher the VIX peak here ends up being the longer the next market rally is likely to be.

No “AI” was used to write this email or edit it.

And…..

If you have not yet upgraded to WSW Pro now is the time to do it.

On Thursday I sent WSW Pro members a trading alert saying that I was selling some positions.

The next day was the Friday smackdown.

Yesterday, I sent them my game plan for the coming months, telling them the type of trades I actually plan on doing.

We are in a key time in the markets now.

To upgrade to WSW Pro go here:

https://wallstreetwindow.beehiiv.com/upgrade

-Mike

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