VIX Volatility Chart

Volatility plays a key role for stock market direction come Tuesday when US trading resumes. The volatility drama from Friday was described in the prior post. The 200-day MA at 14.33 is a critical level and with price at 14.04, below the 200-day MA, the market bulls are happy. If VIX moves above the 200-day MA, the bulls are toast.

The thick red line identifies the 14.00 level which is a bull-bear line in the sand calculated by the Keybot the Quant algorithm. The market bears are happy with the VIX at 14.04 above Keybot's 14.00 level.

Thus, follow these two levels on Tuesday morning to forecast the broad stock market direction forward. The VIX trades before the regular session so you can forecast Tuesday's direction for the stock market before the opening bell occurs. With the VIX starting at 14.04, if price falls under 14.00 the bears are toast since the bulls will create a relief rally and a joyful bullish start to the year for stocks. If VIX remains between 14.00 and 14.33, status quo, stocks will stagger sideways with a slight downward bias. If VIX prints above 14.33, the stock market will begin tumbling lower in earnest. 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.

Note Added Saturday, 1/7/17: The VIX collapses to an 11-handle during the first week of trading in the New Year so the bulls print record highs in stocks.