Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Monday, May 9, 2011

VIX / SPY Charts

Click on above image to enlarge

I am returning to my blog posts after 3 month's off from trading.  I highly recommend it to anyone that does this year after year, if you don't you will reach burnout at some point. 

I posted tonight's charts that show how the VIX is a leading indicator on the SPY.  In the lower chart, when the VIX crosses the blue line to the topside it is viewed as a sell signal on the market and when it crosses through the blue line to the downside it is widely viewed as a buy signal on the market.  Also, when the VIX breaks out of its trading range marked by the brown channel lines it becomes an additional buy or sell signal on the market.  Last Monday, 5/2, the VIX crossed above the blue line and marked a sell signal on the market which is drawn with a red line and transferred up to the SPY chart.  Last Friday, it was threatening to break out of the brown channel line for an additional sell signal on the market but today it fell back down to the blue line and closed there leaving the market with no directional bias which is reflected in the yellow caution line transferred up into the SPY chart.

Alan