VIX Volatility Daily Chart

VIX jumped above 20 yesterday, check that, actually well above 21. Price exceeds the October market bottom but not the June market bottom that was identified by VIX 22. Thus, the 22 level has street cred moving forward. The June bottom occurred with the VIX topping and printing negative divergence (red lines for indicators). Note, however, the October market bottom occurs with the VIX more agreeable to seeing new highs with long and strong profiles for the indicators (green lines). The new VIX highs now occur and note the continued long and strong behavior of the indicators. The indicators are very overbot, however, so a move lower would be needed simply to provide the stock market some relief from the selling, a dead-cat bounce, at a minimum. The enthusiastic indicators hint that higher highs in volatility are likely required in the future.

As mentioned often, the VIX 200-day MA is an important short term market signal. The red circles show the market sell signals and the green circles show the market buy signals. Remember, volatility moves inversely to the markets. This is why it is also called the 'Fear Gauge'. A spike in volatility means a spike in fear and a stock market that is selling off. Volatility will likely plot a path higher through 2014 as the brown channel indicates. As long as the VIX remains above the 200-day MA at 14.49, the market beatings will continue. If the VIX drops under the 200-day MA at 14.49, the bulls have a strong relief rally underway. 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.