VIX Volatility Daily Chart

Yesterday, volatility was, well, volatile.  The long upper and lower shadows on the Wednesday candle proves how volatility was up and down and all around.  The Knight Capital trading malfunction no doubt contributed to the action as well as the New York Fed's attempts to keep volatility down in the afternoon.  We have watched the drama around the 18.80 level the last couple days, the 18.80 level of interest is identified by Keystone's algorithm. So pay close attention to VIX 18.80, above and the market bears will rule pushing the SPX down to 1366. If the VIX drops below 18.80, the upside rally will continue with the SPX moving to 1391.

For the chart, note the textbook falling wedge, which occurred with oversold stochastics and universal positive divergence for the indicators as shown by the green lines.  This positive divergence created the jump off the bottom ten days ago which caused the markets to sell off.  The top in VIX seven days ago came with higher highs in the indicators and note the MACD line that is actually showing a long and strong profile (green circle)--and price did not even make a matchinig high as yet compared to the 20.5-ish level. This behavior is bullish for VIX (bearish for markets). The projection is that the VIX should spike up for a higher high than 20.5. At that time, study the indicators to see if they take on long and strong profiles like the MACD line.  Of course, Draghi announces the ECB rate decision in the minutes ahead and that will dictate the near term market direction. 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.