VIX Volatility Daily Chart

Keystone's algo has identified volatility as having the most influence on the markets over the last month. VIX 14.70 is the bull-bear line in the sand. As long as the VIX stays under 14.70, the bulls have no fear or worry, every day is blue skies with the SPX continually moving higher. If the VIX moves above 14.70, it is time for the bear's to growl and the market selling will be noticeable. Note the two teases over the last five days (blue circles).  Just enough to keep the bears interested, but, like Lucy and Charlie Brown, the football is pulled away at the last minute resulting in the bears falling flat.

In February, the green falling wedge, oversold stochastics and positive divergence created the spike higher as expected. Ditto the purple lines, same dealio.  The indicators are long and strong as shown by the short green lines. The RSI is sideways but the others have plenty of juice to require higher prices moving forward. The weekly VIX chart shows basing and a strong preference to move sideways to sideways higher here on out.  The 20-day MA is above the 50-day MA which is bullish for volatility (bearish for stocks). The 200-day MA sloping negatively is a very bearish indication, however, watch for this to flatten and then reverse to the up side as the next couple months play out, which would indicate a VIX in play sideways to sideways higher for the weeks and months ahead.

The green line in December shows that higher highs are desired; price made a new high and so did the indicators. But the politicians provided a fiscal cliff resolution to start the year which pole-axed the VIX dropping it under 15 and struggling lower as the broad indexes make new highs day after day. The VIX will need to print above 23 in the future; it is simply a matter of when. The VIX charts are very constructive for upside moving forward. The purple positive divergence lines created a bottom so price would not need to come back down to 11-12 again. There is a gap remaining at 11.6-12.5 so that must be respected for a potential fill, but overall, up is the direction forward. Up VIX means down markets. The blue line is the key; happy bulls below 14.70; happy bears above 14.70. 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.