Saturday, December 27, 2014

VIX Volatility Daily Chart

Keystone often provides the VIX chart to gauge markets. There was high drama on Friday. Two important levels are in play for volatility. First, a level you can always monitor is the 200-day MA, now at 13.99, which indicates whether the stock market is in a bull or bear pattern. Above the 200-day is bearish and below bullish. Below reflects a calm stock market moving steadily higher while the VIX above the 200 indicates worry and concern and traders making knee-jerk reactions selling stocks moving towards fear and panic.

The second level to watch is VIX 14.68 identified by the Keybot the Quant algorithm as a key bull-bear line in the sand. Late Friday the market bears push VIX above 14.68 to create the late day market swoon but then during the settlements at the closing bell the VIX placed a 14.50 print for the weekend in bull territory under the critical 14.68 level which creates market bullishness.

So this is high drama on tap for Monday. Market bulls win big if the VIX stays under 14.68 and then drops under 13.99. The upside party will be verified. Drunken traders will break open the lock on the liquor cabinet door and dance obscenely as stocks are randomly purchased and the SPX heads above 2100. Market bears win big if the VIX moves back above 14.68 since a top will be placed on the market upside and stocks will begin selling off and rolling over to the downside. Who will win?

The previous CPC chart says the latter scenario will win (bears). The markets may perform a jog move through the holiday-shortened trading week with the SPX selling off, but recovering, thus maintaining some semblance of the Santa Claus rally, then roll over to the downside from 1/5/15 on. The other scenario is for markets to simply sell off starting at any time and continue moving lower into the new year. Obviously, both these bearish market outcomes will be incorrect if the bulls send the VIX under 13.99. The bear scenario for stocks occurs if the VIX moves above 14.68 and higher. 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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