There was a time when VIX tagging 9.30 was momentous. VIX’s all-time low of 9.31 was reached on Dec 22, 1993 and it subsequently soared as high as 89.53 (Oct 2008.) This past December, however, marked a progression of lower and lower marks that culminated in a new all-time low of 8.84 in July.
Want to know whether stocks have topped out? First, you’d have to ascertain when VIX will stop melting down. We’ve seen 17 straight sessions below the bottom of our long-term yellow channel. The only signs of life were the backtest of a rising channel that broke down in order to get SPX up over 2500.
With important resistance coming up today for SPX/ES, might VIX be ready for another (easily-contained) pop?
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ES is coming up on the red 1.618 at 2532.21 and an even bigger 2.24 at 2545.06. From either of those levels, a drop to backtest 2500 would be substantial enough to quiet the naysayers.
SPX’s 2.24 and 1.618 are practically on top of one another at 2537.25 and 2536.31. An intraday pop of 6 points would do it. That would take ES to 2532.21.
CL is coming up on its SMA200. Its spike up through the mark last month was instrumental to stocks’ rally. If it drops through, that could spell trouble for bulls.
USDJPY, despite showing signs of breaking down, continues to hang on. Between it and CL, something has to give.
I’m going to suggest shorting SPX at the 2536-2537 target range with relatively tight stops and a 2500 target. If it pops through 2540, there isn’t much resistance for quite a while.
In the meantime, I’m going to post updates on gold and oil and then take the rest of the day off. I’ve been battling a nasty headache, probably made worse by the news from Las Vegas. Such a tragedy…and, seemingly, more to come given the current state of gun laws in this country.
UPDATE: 3:40 PM
ES just reaches its 1.618, so I’d short here with relatively loose stops. SPX has a couple of points to go. Keep an eye on VIX, which is perched in no-man’s land, just above the SMA5 200 but below the SMA10. If it breaks above 9.71, there’s a decent chance of a pop to 11.37 (+17%.)
Note that RB is also in limbo.
Comments
2 responses to “VIX: Pop or More Drop?”
PW, sorry to hear that you are battling a nasty headache. Hope you will get well soon.
About the market, I just have an observation. Correct me if I am wrong. It seems like a divergent with Dow and SPX. Everyday, Dow index has a psychological effect of a dozen points gain consistently. However, SPX does not move in the same scale. SPX may only have a move of 1 or 2 points at most.
Is there any implication of this divergent? Thank you!
I think you have to look at percentage rather than point gains. A 12-pt gain in DJIA right now would be .05%. A .05% gain in SPX would be 1.27 points. What’s a little more troubling to me is that the Dow — which is obviously not a broad index — keeps blowing through overhead resistance. It tends to drag SPX along, oftentimes with no other rationalization.