The market started off modestly today and appeared to be going nowhere until midday when the VIX passed down through its blue 432 EMA line shown in the lower half of the double chart just below.
click on image to enlarge
The VIX 432 EMA line as I have highlighted numerous times through the years is the definitive divider line that buy and sell programs use. Below the line is bull territory and above it is bear territory. As it passed down through the line midday today the market took off on a rip all the way into the closing bell.
Comparing the two charts, you can see every time that the VIX has up-crossed the line it has wreaked havoc on the S&P. Looking at the S&P in the upper half, there is obviously good money to be made before we reach the upper line of the new downhill channel.
Taking a look at the next chart cluster below, we can see that the channels chart of the VIX shown in the lower half shows that the VIX has plenty of room to fall also before it gets down to its lower line.
Is this the beginning of the year end rally which is so desperately needed this year? That question won't become clear until we see what happens once the S&P does reach the upper line of the new downhill channel. Nonetheless, we recently completed a "W" bottom causing a strong short squeeze last week and then the S&P sat down on its 50 EMA yesterday and with today's rise it concludes a successful retest of the 50 EMA after crossing above it last week. With the VIX back on the bullish side of the 432 line and the S&P pushing up from its 50 EMA line, we have the first bullish setup that looks to produce a tradable upside move since the S&P fell out of its 4-year uphill channel on August 20th.
Trade well my friends