Panic on the Streets? Nope.

Bill Luby from VIX and More noted the surprising lack of panic in the market today:

For all the talk about the auto bailout fiasco, a little more than two hours into the final trading session of the week finds the markets relatively unchanged since last Friday. As I type this the SPX is hovering around the 862 mark, down about 1.5% for the week.

Interestingly enough, the VIX has also fallen this week and is currently down about 4.4% from last week's close. In fact, the VIX is setting up for the sixth close in a row of under 60 – the first time this has happened in over two months.

Shorts had an hour or two of fun yesterday, but the buy on the dip crowd appears to be back out in full force today, with technology, small caps, real estate and homebuilders catching a bid.

As long as the VIX keeps dropping, it is reasonable to assume that buyers will continue to step in aggressively to support the market when it pulls back.

At the very least, expect bears to start to lose their nerve if the current pattern continues.

Indeed, coming from the bearish p.o.v., I am feeling the same way: I'm getting impatient with my short positions.

You'd think the market would react quite negatively to the litany of bad news this week. But consider that the market recovered quite nicely today after the White House and Treasury stepped in with a vague offer of support for GM/Chrysler/Ford.

The market digested the Senate's inaction on the Detroit bailout surprisingly well. And where was the reaction to the $50B Madoff fraud revelation? And recall how the market rose after news of last Friday's terrible employment numbers.

So yes, I'm starting to get a bit frustrated with my short positions. The annotated chart of the S&P 500 below gives me some comfort.



We did see lower highs and lower lows this week, but the market held up far better than Harry Reid predicted last night:

"I dread looking at Wall Street tomorrow," Senate Majority Leader Harry Reid, D-Nev., said late Thursday after a vote to consider the plan failed. "It's not going to be a pleasant sight."