SPX S&P 500 and VIX Volatility Daily Charts Diverging

The bulls are having fun each day swigging down Fed whiskey, ECB champagne, BOJ sake and PBOC rice wine. The four central banker horseman of the financial Apocalypse are too kind providing the never-ending easy money hallucinogens. Drunken traders and investors buy stocks at the ask with total disregard for price or performing due diligence. Money managers brag about their vast riches they are making charging fees for research they don't bother doing. Everything goes up on the Fed's easy money so there is no longer any need for due diligence. Timmy Trader returns from the screen printer and is passing out tee shirts and hats that say "I Love Moral Hazard." The love word is shown as a red heart.

The SPX and VIX move opposite to on another over 90% of the time. The Federal Reserve can place its jackboots on the throat of volatility to keep it suppressed and maintain elevated stock markets to protect America's wealthy class that own large equity portfolios. When stocks make a new high, the expectation is that volatility should make a new low and it does for the March rally all the way into Tuesday, 8//11/20.

The green lines show rallies in the stock market corresponding to moves lower in the VIX. The red lines show the VIX popping higher which sends the stock market lower. The blue line shows the SPX printing another high on Tuesday and the VIX comes down for another low. All is right with the world.

The SPX retreats due to the negative divergence appearing on the charts now and the VIX pops higher. On Wednesday, 8/12/20, the bulls send the VIX lower and stocks pop higher. The purple lines are interesting. Note how the VIX kept pushing lower and lower. Chairman Powell was kicking and stomping on Uncle Vix to keep him laying on the floor. The expectation would be for more new highs in the S&P 500 and the goal likely was a breakout to new all-time record highs above 3386 hoping the robots would then kick in with large-block buy programs. However, the SPX stalls at moving higher and can only stumble sideways as the VIX drops. This behavior hints that the SPX is not strong enough to move higher.

Back to the blue line. The SPX comes up to make the higher high on Thursday as compared to Tuesday. The bulls are dancing in the streets singing happy songs so glad they are celebrating such good fortune together. However, the VIX comes back down but cannot print a lower low than two days ago. The VIX should be printing at the blue dot if the SPX is making another higher high, which it was. This behavior hints that the stock market is topping out. Volatility may be on the rise. It is like keeping a beachball under water. Eventually, the Fed's greasy little hands will slip and the beachball will spring skyward up and out of the water. 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 Morning, 8/15/20: The VIX placed a low at 21.40-ish early Tuesday morning and is trending steadily higher for four days in a row. During that same time period, the SPX sells off Tuesday, which would be expected with the VIX moving higher, but then on Wednesday and Thursday, the SPX is teasing record highs again, then stocks roll over slightly on Friday perhaps the near-term trend in the VIX moving sideways to sideways higher creates the sogginess in equities. The market is at a significant top right now but is not rolling over with the Fed stomping on volatility and pumping copper and utes higher. When the Feb/March crash began, the VIX popped from 17.50 to 50 in only five days; the VIX beachball slipped out of the Fed's hands. It is highly probable that this behavior occurs again. Maybe a Black Monday is in our future.