Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Tuesday, July 30, 2013

VIX At Threshold

Stock Market Technical Analysis Blog

click on image to enlarge

In the market today we had a brief warning from the VIX around midday as it crossed above the blue 15 EMA line.  This is of significance in that looking back at the history of the S&P and VIX we see that when the VIX gets above its blue line the stock market starts a selloff.  After the VIX has been above the line and crosses back down thru the line, the S&P starts climbing higher.  Today the S&P was getting close to the brink of a selloff as the VIX crossed above its blue line but in the last hour it has pulled back down below it.  Note that the S&P didn't get quite down to its blue line as would normally happen because the market is being propped up today relentlessly.  If the market had not been propped the S&P may have slipped thru its blue line just as the VIX was crossing above its line and caused a huge intraday selloff.  As we head to closing in a few minutes the alarm bells have quieted.  Nonetheless, the VIX is very close to causing a stock market selloff.  

If Bernanke says something positive tomorrow the blue line will probably push the VIX down causing a new move upward in the stock market.  However, if he says something the market doesn't like or not enough comments that are favorable to the market, the VIX may try to cross above its blue line again and if there are enough sellers at that moment it could cause the S&P to drop below its blue line and if it closes below it the market is in trouble.

This is a rather large pivot, could go either way.

Trade well my friends