James Rosenquist
James Rosenquist is highly regarded in the art world for his innovative approach to Pop Art. He blends advertising imagery with surrealism to create striking, large-scale works exploring consumerism, politics, and cultural themes.
His background as a billboard painter significantly influenced his style, using fragmented images, vibrant colors, and bold compositions. Rosenquist’s ability to transform everyday objects and commercial symbols into powerful, thought-provoking visual statements earned him recognition as one of the leading figures in the Pop Art movement.
His most iconic work, F-111, exemplifies his talent for merging complex, often critical commentary on modern life with visually captivating art.
==============
Tracking Account Valuation January 4, 2022 – $1,206,085
Tracking Account Valuation June 11, 2024- $2,221,961 +90%
Intermediate-Term: ~ Downtrend
LOLR Trend: ~ Downtrend
Positions: 18% VXX, 22% SQQQ, 60% Cash
Hard stops: VXX 39.93, SQQQ 7.03
================
“There is nothing new under the sun.” Ecclesiastes 1:9
“What happens today has happened before and will happen again.” Livermore
“Rather than love, money, fame, give me truth.” Henry David Thoreau
“Excesses in one direction will lead to an opposite excess in the other direction.” Robert Farrell
================
4:00: Intraday Stoch: O/S, Falling- ST BRSH
Daily LOLR STS
6/1-UT 6/1-UT 4/3-DT
Breadth: -457/-1847
ADR: 0.71, SPY: –5.14 NTRL
NYMO: -7 Rising Intraday
NAMO: -11 Rising Intraday
The Summation Index is Rising
=================
The aphorism, “When the VIX and SPX rise together, bad things happen,“ is well-known among market analysts and traders who closely watch market behavior. This concept refers to an anomaly in which the VIX (Volatility Index) and the SPX (S&P 500 Index) increase simultaneously. This anomaly is rare because the VIX typically moves inversely to the SPX.
When both indices rise together, it signals underlying market instability. Traders interpret this as a red flag, generally preceding significant market declines. Over time, this insight has become a commonly accepted principle among market historians.
A prime historical example occurred during the market peak in August 1987, where volatility surged alongside rising stock prices. It was a rare but critical warning signal that traders now view as a classic precursor to market stress.
The 1987 equivalent of the VIX, the $VXO, showed behavior that today’s traders should immediately recognize as a sign of brewing trouble.
Let’s break it down:
1. July 29, 1987:
-
DJIA: 2571.48 (a record closing high)
-
VXO: 16.90
At this point, the market was nearing its peak, with the VXO already elevated at 16.90. This anomaly indicated that traders were pricing in some underlying fear or uncertainty despite the market’s upward momentum.
2. August 25, 1987
-
DJIA: 2722.42 (highest closing level for 1987)
-
VXO: 21.92
Twenty-seven days after the DJIA made a new high on July 29, despite advancing 41.94 points (+5.86%) to its highest close of the year, the VXO rose to 21.92, up about 30%. In a healthy bull market, the volatility index should fall as the index increases, signaling confidence. However, both are rising together, signifying increasing apprehension among market participants.
The Significance of the VXO-SPX Relationship
The simultaneous rise of the DJIA (and, by extension, the broader market) and the VXO suggested that caution was growing, even as prices increased. This divergence is generally a harbinger of a significant reversal or correction, indicating that investors were hedging against downside risks despite the ongoing rally.
The lesson? Bad things happen when the DJIA (or SPX) and VIX rise together.
And so it was in 1987 as this followed the August 25 peak in the $DJIA with a rising $VXO:
In 1987, this was followed by a severe market crash just weeks after the August 25 peak, with the $VXO flashing the warning signs that many failed to heed.
Now examine the last three months of VIX Rising along with SPX making new ATHs like in 1987:
Let’s break this 2024 anomaly down as we had for 1987:
1. July 16, 2024:
-
SPX: 5667.2- a record closing high
-
VIX: 13.19
As we moved through July, August, and September, this anomaly reappeared as SPX and VIX moved higher together.
2. September 26, 2024
-
SPX: 5745.37 (highest closing level for 2024, thus far)
-
VIX: 15.37
Seventy-two days after the SPX made a new high on July 16, despite advancing 78.17 points (+1.38%) to its highest close of the year, the VIX rose to 15.37, up about +16.5%. In a healthy bull market, the volatility index should fall as the index increases, signaling confidence. However, both are rising together, signifying increasing apprehension among market participants – as have safe-haven stocks discussed recently.
Many will attempt to explain away this significant warning with some variation of the dangerous “this time it’s different” argument. However, anyone who has read Jack Schwager’s Market Wizards will recognize the peril in those four seemingly harmless words. Consider the wisdom shared by some of the most successful traders and money managers over the past century on this very tendency.
Throughout history, great traders and investors have issued strong warnings against the phrase “this time is different,” a claim often used to justify why current market conditions might defy historical precedent. This mindset is risky, as it fosters complacency and encourages the dismissal of historical cycles that have repeatedly signaled corrections.
Sir John Templeton famously said, “The four most dangerous words in investing are: ‘This time it’s different.’” While conceding that conditions sometimes change, he stressed ignoring historical precedents leads to trouble. Markets tend to follow familiar patterns, and disregarding these cycles when optimism runs high can result in significant losses (Advisor Perspectives).
Howard Marks of Oaktree Capital has also frequently underscored the dangers of this thinking. He cautions that while some truths exist in arguments for extraordinary market conditions, they rest on the flawed belief that cycles can be permanently suspended. Marks highlighted how this mindset led to bubbles like the tech boom of the late 1990s when investors abandoned traditional metrics like price-to-earnings ratios (Advisor Perspectives).
Moreover, traders interviewed by Jack Schwager in Market Wizards consistently emphasize the importance of discipline and risk management, especially during market euphoria when the temptation to believe “this time is different” grows strongest. They warn that short-term deviations from historical norms often mislead investors, resulting in painful market corrections (CFA Institute Blogs).
In conclusion, the consensus among veteran traders is clear: while market conditions may seem unique, history shows that they nearly always revert to the mean. Ignoring the lessons of the past in favor of overly optimistic projections often leads to severe financial setbacks. More importantly, those who succumb to this thinking will miss out on the spectacular opportunities available to traders who capitalize on the impending reversal of the market trend.
You must be logged in to post a comment.