Today’s market is like an expensive house filled with natural gas…

From the outside, everything looks normal. The yard is manicured and the façade is pleasing. You’d never know anything was wrong. But inside lurks a giant disaster waiting to happen…

On Monday the VXX exchange-traded note (ETN) hit an all-time low (11.49).

[The VXX is related to the market’s “fear gauge”: the Volatility Index (or VIX). The VXX and the VIX both represent investors’ anticipation of chaos in the markets.

When these indicators are low, extreme complacency is the overriding market sentiment.]

The VIX itself is now hovering just above its record low, too. As we go to press, the VIX is down to 11.77. It hasn’t been this low in almost two years. (Its all-time low was 9.31.)

Chart

Regular Daily readers know any chart pushed to its extremes is primed—like a stretched rubber band—to snap back. We call this action “reversion to the mean.”

As you can see in the chart above, low VIX readings like today’s are often followed by violent moves higher. It only takes one tiny spark to ignite the entire gas cloud…

No one can know what this spark will be…

It could be an incident at the Republican National Convention underway in Cleveland… further fallout from a failed coup in Turkey… complications from Britain’s “Brexit” vote to leave the European Union… a new plunge in oil prices… a military conflict in the South China Sea… or a “black swan” event—something 100% unforeseen.

We don’t have to know the actual spark. All we need to know is the house is filled with gas today. Trade accordingly…

Bottom line: No one should be rushing to put new money to work today. Wait for the spark to ignite the gas… then use the ensuing chaos to your advantage. We’ll be able to pick up some great businesses at good prices… and sell options to boost our safe income yields.

Until then, make sure your risk management is squared away…

Recommended Link

Rickards: “Don’t Buy a Single Ounce of Gold…”
**This is an URGENT warning from Jim Rickards.** If you’ve seen the writing on the wall, like me, you know that gold could soon hit $10,000 per ounce. However, today I’m urging you NOT to buy a single ounce of gold till you read what I have to say. Click here for access to my urgent gold announcement.