Wednesday, October 9, 2013

Keystone's SPX:VIX Indicator

Keystone's SPX:VIX Indicator has been on the back burner for many months as the Fed and central banker orgy this year maintains lofty stock prices while crushing volatility lower. The Fed keeps selling volatility to keep markets higher. The recent price action finally starts to send the ratio towards normalcy. The 68 level is the danger line. When the SPX:VIX ratio hits this level, a mini crash can be expected, where the Dow typically loses from 100 to 300 points, or more, that day or the next day. Nine months above the 68 level is very unprecedented for this indicator. The expectation would be that it would have dropped under 68 by now, but, the Fed's easy money crack cocaine is powerful.

The last test of 68 was at the start of the year. The markets were on the verge of complete collapse, ready to fall off the cliff. But Vice President Biden stepped in and saved the day getting Congress and the president to agree on a solution, and the markets never looked back. Note how the ratio is down near the June and August market bottoms but the SPX price remains well above these levels. The SPX:VIX should act as a weight pulling the SPX price lower moving forward. Watch the 68 level since, if it occurs, a mini flush move lower will occur for equities. Bulls obviously need to move the SPX higher, and volatility lower, to send the ratio higher and avoid the sub 68 disaster looming for markets. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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