It's a vixing question

Just a month ago Guambat was, again, expressing a bit of aggro that Mr. Market was holding up bigger than Chesty Bond in the face of a deteriorating (or, as Guambat saw it, deteriorated) credit system, having a whinge that the market could only just muster bearly a correction.

Now that a few more points have been shaved off Mr. Market's carefully groomed face, the feeling is becoming more pronounced that maybe, just maybe, the market will finally break rather than just bend and give us the proper bear that many bear hunters have been looking for.

But really bad bears don't just jump out of the woods at you. First they stalk, and let the fear get very personal, very sweet. You can still manage a pucker and a whistle as you hurry along past the graveyard.

And so it is that you continue to see signs of puzzling "complacency" like this, from MarketBeat:

Investor sentiment has, for what it’s worth, turned viciously negative as investors consider the financial contagion that’s started to batter the economy, which is in turn creating more turmoil for the financial system, in the form of possible downgrades for bond insurers and reduced lending from banks.

The Standard & Poor’s 500-stock index has fallen 11% since December 26, while the Russell 2000 has declined 15% in the last 14 days. At the same time, Steve Goldman at Weeden points out that sentiment indicators, such as the Chicago Board Options Exchange index, or the VIX, are still at levels associated with a bit of concern rather than all-out panic.

“Two days ago we had a decline of 2.5% in the S&P and the Vix barely moved,” he says. “I looked back in history, and the times this has happened, the Vix was in the 40s. It’s in the 20s — why?”

And Barry Ritholtz asks, and gets a thousand responses to:

Question for the assembled multitudes: Are we closer to the beginning of this correction, with an oversold bounce due (anyday now) or-- is this the start of something even uglier, with the market heading relentlessly down without interuption?