The more people explain why it is not 2008 the more I believe it is except on a much larger scale. Although the big variable and one that makes trading so difficult is timing.
Instead of giving you a list of comparisons though, let’s see what the charts say. After all charts capture everything from indecision and economic uncertainty to investor psychology and Fed intervention.
Skew Vix Divergence
This chart compares the skew divergence between the current market (March 9, 2011 to present) and 2008 (March 31, 2008 through September 8, 2008). Up until 3 weeks ago they moved in tandem. Pretty amazing considering the length of time (about 5 months). This led me to compare the SPX for the same time frame since the skew divergence tracks the SPX so well.
SPX – Same time frame as above (March 31, 2008 through September 8, 2008 VS March 9, 2011 to present).
Again a pretty similar correlation. The backdrop was also similar although now larger in scale. In early 2008 there was Bear Stearns of which many have now compared Greece. As 2008 progressed so did news of Lehman, subprime, deteriorating macro picture. Today we have sovereign debt beyond Greece and stocks like SocGen and BAC breaking down and of course a deteriorating macro picture.
SPX – What comes next.
This is the same chart above except the 2008 chart is extended to show what comes next should this in fact be 2008. And this is where that variable of time comes in, the great unknown.
And lastly how could I go a day without updating another skew chart of the current market.
We have data overload on Thursday so buckle up. It will be a wild ride and I suspect further nails driven into those dreaming of a second half recovery.
Skew Updates and 2008 Comparison- Macro Story.
Images: Flickr (licence/attribution)
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