I was asked yesterday during a TV interview about why the market was reacting so negatively to the EU's US$1 trillion rescue package. The VIX initially fell to below 30 after it rocketed to above 40 and is now just trading above the 30 level. A fall below 30 would signal to me that sentiment is improving.

Key concerns that caused the collapse of the Euro and heightened market volatility were comments from DB that Greece would not be able to repay its debt and could even head for bankruptcy. I think investors have very short memories about the crisis facing global stock markets in late 2008 into 2009. The chart below of the Dow shows what happened to the index during the financial crisis in mid 2008. I have included it here to refresh memories. Read more...