http://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=0&mn=6&dy=0&id=p70142979615&a=266398464

As we frequently note volatility is mean reverting.  Friday it reverted in a major way.

http://stockcharts.com/h-sc/ui?s=%24VIX&p=D&yr=0&mn=6&dy=0&id=p34770779486

There has been extraordinary anxiety in the marketplace. This derives in part from market perception of high values and the looming monster of Fed rate rises.  It’s like walking throgh the haunted house and the skeleton  yells boo.  You know it’s a silly game, but you have to make a dash for a chair as the music stops.  So when Fed officials scratched their left ear lobe and had hard boiled instead of poached for breakfast traders paniced — actually that’s what this is — trader panic.

We lightened up our already small position and will try to catch the turnaround.  We suspect that after this smack in the face of a bar that there will be some follow through on the downside, but we think that the panic will subside and bargain hunteres will be profiting from the panic.  And….

volatility will revert to the mean.