Thursday, November 1, 2018

VIX Volatility and SPX S&P 500 Daily Charts; Diverging Prices

The red circle shows the VIX popping above the 200-day MA the exact time that the bears slit the bulls throat. The VIX 200 is one of Keystone's key short-term market signals and that cross was called out when it occurred.

The S&P 500 played around with its 200-day at 2765 and then failed in the middle of October. Right now price is coming back up for the potential back kiss. The jobs report is tomorrow morning so anything can happen.

The blue circles highlight the divergence in the VIX and SPX prices. The VIX spikes higher in early October after the 200-day MA gave way, so stocks plummet lower. After a bounce, the SPX collapses again to the second blue circle. The VIX is a smidgeon higher so this confirms the further weakness in the S&P 500 price although the higher high in the VIX is cheesy (middle blue circle for the VIX).

Then, looking at the third blue circle, the most recent, the SPX prints another low. The negativity is rampant. Traders are throwing out the baby, bath water and the sink. Indiscriminate selling. Carnage. Wow. Volatility should be catapulting to the stratosphere, however, the VIX actually slumps away lower to 24.6-ish. That is interesting. Volatility is not impressed with the S&P 500 continuing lower. The VIX is saying do not drop anymore; start a relief rally instead. And it occurs.

The VIX sports a 19-handle below the 20's but the bulls still need the VIX below 15.96 before they can cheer. The bears need to keep pressing volatility higher which makes it easier for them to slap the bulls around. The price divergence in the VIX and SPX provided the basis for the current relief rally. 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.

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