By now everybody has heard about the Italian debt saga. All we hear on CNBC is how bad Italy is. There is no doubt the country has problems, but when everybody suddenly becomes an expert on Italy, it usually tells a story something could be close to reversing.

We are seeing Italian markets try the first proper reversal since the debt saga started. The MIB has reversed losses we saw earlier today.


The Italian bank index has also reversed some intraday losses. Note this index is down 17% in a few sessions.

The Euro Stoxx 50 is trading right on those levels we saw during September lows. The trend is horrible, but these levels are big supports.


VIX and V2X have absolutely exploded lately. On October 2 we pointed out that VIX could be a good global hedge. VIX has gained 58% since then. Chasing protection here seems like a very late trade, especially since the pundits in media all now talk about the VIX.

Below image shows the CBOE put call ratio (white) and the SPX (orange). Spikes in put call ratio shows that investors are buying protection “in panic”. This has most of the times proven to be the late trade and markets ended up bouncing for the short term.

Source: charts by Bloomberg