Sunday, June 8, 2014

VIX Volatility Weekly Chart 7-Year Low Signals Significant Market Top

The low VIX confirms the low put/call ratio numbers both indicating rampant complacency and lack of fear in markets which occurs at market tops. The red circles are the key market tops over the last ten years and the green circles are the key market bottoms. What do you think will happen a s the weeks play out? VIX levels are now comparable to February 2007 when the stock market placed a multi-year top (October 2007). Surprisingly, even Fed Chair Yellen voices some concern that traders are now too over exuberant at taking on risk without properly assessing the risk (complacency).

Note that the 22-23 level holds as a ceiling for over one year's time so any move above 23 will hold significant importance and point to further trouble ahead for the broad indexes. Of course the SPX will be 50 to 100 handles lower when the VIX is testing the 22-23 resistance which would be a bounce, or die, pivot point. The low VIX indicates fearless traders are buying any stock that can fog a mirror. There is no use in studying fundamentals since the Fed and other central bankers plan to pump the stock market higher forever. Bullish traders remain drunk on the Fed wine each day mainlining the easy money heroin into their veins.

Of course, this multi-year complacency is the point in time where the markets are most exposed to a drastic and sharp sell off. Traders are joyously bidding markets higher without concern or worry. The party is at its peak right now, right before the puking begins. 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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