Wednesday, November 20, 2013

VIX Volatility Daily Chart Positive Divergence Bounce

Volatility finally shows some sign of life the last couple days. The green lines show the oversold conditions, falling wedge and positive divergence that created the launch. There are two lines in the sand to monitor as highlighted below. Right now, the market bulls are not worried. Complacency remains rampant. Everyone's price targets for the SPX are 1800, 1900 and even 2000 as the new year arrives since the Fed continues supplying the easy money crack cocaine to pump the stock market. Traders universally agree that markets can only go up here forward. Of course, be wary of such rampant enthusiasm.

The VIX pops but does not provide any threat to equities, yet. The thick maroon line is 13.97 identified by Keystone's algo, Keybot the Quant.  Bad things will happen to equity markets if the VIX moves above 13.97. If VIX stays under 13.97, the bulls are fine and they will continue to enjoy Fed wine each day and move the SPX higher. The other critical level to watch for VIX is the 200-day MA now at 14.36. This is an excellent signal line that tells you the markets are in trouble above the 200-day while the market bulls are fine as long as the VIX remains under the 200. The RSI is sneaking out a higher high, and moving above the 50% bull-bear line, hinting at further upside ahead. Ditto the MACD line showing long and strong behavior. 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.

Note Added 8:02 PM:  VIX catapulted to a HOD of 13.94 only 3 pennies shy of the 13.97 line in the sand. VIX closes the day at 13.40 remaining in the bull camp.

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