Within 12 days the markets went from uber complacent to WTF-level fear. The Vix spiked so much that it suggests the start of a systemic threat.
But there are few relevant issues left from the 2008 financial crisis. The main threats include:
1. China bad debt coming due. Everyone knows about it, and the warnings have been getting louder and louder. At the end of the day the central government has $4trillion to do what it needs to produce their projected 7.5% GDP growth.
Even though China has the resources to prevent major damage from there debt issues, the last time the debt issue really flared up caused a sizable decline for China in the summer of 2013. Leading to an approx 6% decline in the SP500.
Considering the low rate environment, with the treasury looking to flatline here, the best play may still be equities. With the demand for equities still present, elevated multiple may persist.
2. Emerging Markets unprepared for Fed tapering. I have to kinda call bull shit on this one. The Fed gave the rest-of-world arguably an extra 6 month (definitely an extra four month) to prepare, and when the Fed started easing on the purchases, the reaction was mute. Maybe this go around is different. The decline in rates may very well have had something to do with it. Declining currencies will help their economies, in the longer-term. In the short-term it causes developing currencies to rise, effecting equity markets, aka, the Yen. (See pervious Market Thought posts.)
3. Backing-off from the elevated trailing multiple. The SP500 has increased, from increased reported earnings, but also increased trailing multiple. If the multiple eases, the market will depend on the reported earning growth.
The increased level on the Vix suggests the markets are nearing a washout. Support exists via the 100sma on the daily, and the 28sma via the weekly.