Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, February 6, 2013

Watch the VIX

Stock Market Technical Analysis Blog

click on image to enlarge

In the market today we had a drop at the open and then climbed to flat by midday with a drop back down in the afternoon climbing back to flat at the close leaving the S&P pretty much the way it was as shown in the top chart above.  What's coming next in the market will happen because of the lower chart above, the VIX.  I realize that most every big name technician out there is predicting a big drop in the market any day now including renowned technician Doug Kass who is headlining tonight with a prediction that a major drop in the market is imminent.  

With so many technical leaders leaning the same direction it is easy for people to decide to go with the flow but I want to focus attention on the VIX tonight as it is starting to indicate something different.  In the two charts above I have applied the sentiment EMAs to the S&P and the VIX.  It can easily be seen that they pretty much rule these two indexes.  Looking closely at the last couple of days trading in the VIX we see that the smaller red line EMA is starting to be turned downward by the larger green EMA line.  If this downward curving pushdown continues through tomorrow we could be in full rally mode within a couple of days for another attempt at 1550 on the S&P which has been denied so far.  Making it simple, when the green line pushes the red line down on the VIX the market has a multi-day rally.  A downward curve is starting to show as of today.