You Can See the Rotation Occurring
With multiple events happening at the same time, you can see the rotation occurring. The long momentum stocks/short emerging markets trade has been a good one for many hedge funds and that has come to end, at least for the short-term. As they exit the momentum stocks (think biotech,) and cover their short emerging markets positions (look at the recent run in EWZ), stocks and indexes are moving to extremes at both ends of the spectrum. The best sign for the longer term would be 2-3 days of sideways-upward movement. This behavior would signal an end to the short-term unwinding and the likelihood of the resumption of lower volatility.