Now things will get interesting.

As you know, we've been making a very public call to short the Nikkei through EWJ (short at $12, using Jan $12 puts at 0.55 as well as /NKD Futures short at 18,100) and today you've officially missed your chance as the Nikkei plunged back to 17,900, down 200 points from the open on a downward-revised 2nd quarter GDP report that clearly puts the World's 3rd-largest economy in a rapidly deepening recession. 

Since Japan is an EXPORT economy, that means that other people are not buying their stuff – despite the fact that the Yen is down 36% in the past 24 months and down 15% since just the end of August.  That makes Japanese goods cheaper abroad and increases the amount of Yen taken in by the exporters when they sell goods in foreign currency and it's STILL not enough to pick up the sagging GDP of Japan.  

That should scare people yet, strangely, it doesn't.  In fact, investors have never been LESS scared – as measured by runaway Bull/Bear Ratios and a ridiculously low Volatility Index (VIX) that is somehow indicating that a Dow that has climbed 1,500 points in 60 days is NOT volatile.  

I suppose, if you take the very narrow definition of volatile to be “liable to change rapidly and unpredictably, especially for the worse” then no, the market is not very volatile as it only goes up.  HOWEVER, the primary definition of volatile is the one I'm worried about (probably because my step-father was a chemist) and that one says “easily evaporated at normal temperatures.”   THAT is my concern about this “rally” – it could easily all vanish in a puff of smoke.

Outside of the US, the rest of the World sucks and the Global markets (see chart above) are reflecting that with a fairly flat performance for the year.  Hell, the S&P would be in the same boat had not we magically been saved in October and we're still not quite sure what exactly happened to turn our particular local markets so gung-ho bullish – outside of the generally conspiratorial theme of “Manipulation.”