Tuesday, November 4, 2014

VIX Volatility Daily Chart 200-Day MA Bull-Bear Line in the Sand

The VIX 200-day MA is an excellent market timing signal that you can monitor continuously. Very simply, if the VIX moves above the 200-day MA then markets are in trouble selling off and dropping in earnest. If the VIX drops under the 200-day MA, the stock market rallies higher. The VIX 200-day MA is at 14.10 and this level will have a huge impact on markets moving forward. VIX is above 14.10 so market bears are favored moving forward despite the elevated stock market.

The interesting thing is that the Keybot the Quant algorithm is now tracking volatility as the number one important driver and determinant of market direction for this point in time and guess what? Yep, the algo also says VIX 14.10 is the line in the sand. It is rare the two numbers match up utilizing the two different approaches. This gives VIX 14.10 enormous street cred.

There are two key events occurring over the next 36 hours. First, the mid-term election results in the States and second the ECB meeting Thursday morning. Both are capable of either catapulting markets wildly higher, or, crushing them lower. Use the VIX 14.10 level as the gauge of whether the stock market move is real or not.

If markets rally strongly say tomorrow if the republicans take the Senate, two outcomes may occur. If VIX drops under 14.10 the move higher in stocks is real and the SPX is heading to 2030. If stocks rally but the VIX stays above 14.10, the market bulls got nothing; markets will reverse and sell off.

The top is in for stocks as long as the VIX stays above 14.10. A new leg higher begins in the stock market if VIX drops under 14.10. This VIX 14.10 level will be in play through the end of the week so write it down and reference it often in the coming day or three. 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 11:34 AM on Thursday, 11/6/14: The VIX remains above 14.10 through the Wednesday session into today. VIX is currently printing 14.23 continuing the drama. The LOD is 14.17. The bulls need VIX under 14.10 to prove that more upside is on the way. Equities are mixed the last several days in choppy trading. VIX must make a decision. Either collapse through 14.10 and 14 and signal an upside rally with SPX above 2030, or, bounce from here and catapult above 15 to send equities lower and begin a pull back move for stocks. TRIN Arms Index is dead flat at 1.00 not choosing bulls or bears today. Perhaps another day of sideways with the Monthly Jobs Report on tap tomorrow morning. There are four significant events over the last week; Japan QE, US elections, the ECB today and Monthly Jobs Report tomorrow. Each day the stock market is faced with a new binary event.

Note Added 11:48 AM on 11/6/14: VIX 14.27. Can the bears hold the line or will they crumble? The VIX is squeezed by extremely tight standard deviation bands on the 2-hour chart. A big decision is imminent either now, today, or at the very latest at the opening bell tomorrow.

Note Added 12:10 PM on 11/6/14: VIX 14.43The beat goes on.

Note Added 12:23 PM on 11/6/14: VIX 14.33. SPX 2026.49. HOD 2027.35TRIN 0.98. Watch the SPX all-time high at 2027.35 that printed this morning. The SPX 2-hour chart indicates a move down in price should begin at any time for equities. If VIX moves higher that will confirm any market selling. Lots of drama is ahead through tomorrow's opening bell.

Note Added 1:09 PM on 11/6/14: The SPX prints a new all-time high at 2027.37VIX 14.25.

Note Added 6:32 PM on 11/6/14: The SPX prints a new all-time high at 2031.61 and new all-time closing high at 2031.21. VIX drops to 13.67. The VIX lost the important 14.10 level at about 3:30 PM and stocks catapulted higher from there. Bears need to push VIX above 14.10 tomorrow or they will have to experience more pain with stocks moving higher. The bulls are on easy street as long as the VIX stays under 14.10. The bulls were given the benefit of the doubt ahead of the important jobs report tomorrow morning.

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