VIX Volatility and SPX S&P 500 Daily Charts; Volatility Hesitant to Move Lower as SPX Prints All-Time Record Closing High at 3943

Follow the bouncing ball. The US stock market (S&P 500; SPX) moves inversely to volatility (VIX) over 90% of the time. Thus, a stock market that is getting hammered by the bears and dropping like a rock occurs as the VIX spikes to the moon. People are panicking and becoming fearful, so the VIX pops, thus it is given the tag name "Fear Gauge." The spikes in the VIX are good entry points for buying stocks long. You always run at the burning building while everyone else is screaming bloody murder running away and throwing their stocks away.

The VIX is not much use for calling tops, however, since it should be subdued in a low 9-15 range flatlining. The CPC and CPCE put/calls are much better at calling the tops and as the uber low numbers indicate, for many, many weeks, an unprecedented lengthy topping process due to Fed and Congressional largess, that the stock market is about to experience an epic comeuppance. Interestingly, the $1.9 trillion stimulus only fuels the wildly euphoric bullish frenzy. Young folks toss their stimulus checks into bitcoin sending it over $60K. They will lose their shirts.

The SPX and VIX are diverging. Volatility flattened in February and stopped making lower lows now as the SPX price prints one record high after another. VIX should have been sub 20 at the February top and definitely sub 20 if not sub 18 now at this record SPX closing high at 3943.34. Something is amiss. To prove the bulls correct, the VIX needs to drop 2 to 4 handles this week. Some traders are buying protection.

VIX is trading up right now at 21.40 with the S&P futures up +5. Both volatility and futures are up so one of them is wrong. A good time to buy is up at that 37+ level when the baby is thrown out with the bath water as well as the sink and everything else. A VIX above 37 and rocketing higher is when money managers walk out on to the ledge and contemplate a leap. Fortunately, they lock the windows nowadays. As they are losing all their clients money, that is when you go in and buy.

The green circles on the right in each chart, the most recent action, are interesting. Note how stocks pulled back only a small amount but the dip-buyers are tripping over each other to buy, buy, buy, like the guy on television said to do. A VIX at 28 is not fear and panic and that is also evidenced in the CPC and CPCE put/calls that have not shot higher as yet. The complacency remains and with more stimulus money that can be gambled on the stock market, Americans figure life is good. It always looks good before if completely falls apart.

Watch the VIX closely to see how today resolves. Either VIX or SPX will win, not both. The Fed is on tap Wednesday so the bulls will try to keep stocks elevated into the meeting. Stocks are typically bullish into the Fed meetings. The new moon peaked on Saturday, the overnight is pitch-black outside, usually stocks are soft moving through the new moon. The VIX should be at least sub 20 so see if that happens this week, or not. 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.