Keystone's SPX:VIX Ratio Indicator

Keystone's SPX:VIX Indicator is back in vogue. It has been a while, almost six months. This indicator is regularly updated on the Short-Term Market Signals page. When the SPX:VIX ratio moves above 68, the bulls are launching a rally run. When the 68 level fails, this triggers a crash signal and the Dow will typically drop from 100 to 300 points that day or the next day and markets will sell off for an extended period forward, as long as the ratio stays under 68. In late December, as the fiscal cliff deadline loomed, the markets were falling apart into the start of the year. The SPX:VIX lost 68 which created the 160-point drop on 12/28/13 and lights the way to an extended and sustainable bear market. But, the politicians provided an 11th hour stick save kicking the fiscal cliff can down the road saving the markets and leading to the rally this year fueled by the Fed and more importantly, the weaker yen from the BOJ actions.

The SPX:VIX ratio collapses due to the spike in volatility yesterday with the VIX spiking over 21 intraday. Interestingly, the ratio is a touch lower than the February low so this is the lowest number of the year thus far. The ratio is only 9 points away from the 68 line in the sand. Keep an eye on it. If 68 ruptures, hang on tight since the markets are going to take a substantial drop lower and in quick order. If the bulls can keep the ratio above 68 and heading higher, the markets will float along sideways with an upward buoyancy. The SPX:VIX is simply another tool to follow moving forward. 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.