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The $VIX Report: The Trend in Price is Down But Look for the Bounce

thetechnicaltake's picture


Figure 1 is a weekly chart of the SP500 with the $VIX data hidden. The indicator in the lower panel assesses the current value of the $VIX relative to pass swing points in that data. There are two points worth making.



Since April, 2013 the indicator has been diverging negatively from the price action. (I have been making this point since September, 2013; see this video.) The failure of the $VIX to break below a value of 12 and the failure of the indicator to confirm the highs in price are noteworthy. These distortions are now being corrected. The indicator is rolling over, and a bottom in prices won't be achieved until the indicator hits bottom as well. This is several weeks away. Thus the trend in prices is down.

(For the record this is what I said on January 14: "The $VIX has failed to break 12 or rather more importantly, a level of 12 continues to be where selling in the equity markets takes place. I have contended that the inability of the $VIX to break below the 12 level is a sign that the current market rise is not sustainable, and this divergence has been going on for over 6 months now. In essence, the $VIX has failed to confirm the price action. More importantly, it appears that the rocky start by the equity markets this week will see the $VIX close above a prior key pivot point. This always suggests caution as the possibility of a trend change in the equity markets is very real.")

Figure 1. $VIX/ weekly



But there is hope!!

Figure 2 is a daily chart of the SPY with the $VIX data in the lower panel. The $VIX is sitting at a level where 4 out of the 6 short term/ intermediate term bottoms took hold in 2013. Will 2014 be the same? This is the test for the $VIX and the markets. Look for the markets to put up a fight, but from this perspective, the tide has already turned.

Figure 2. $VIX/ daily





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Thu, 02/06/2014 - 16:24 | 4408881 The worst trader
The worst trader's picture

And just like that the VXX is hammered into the as usual

Thu, 02/06/2014 - 07:31 | 4407215 samcontrol
samcontrol's picture

I bought svxy yesterday

Thu, 02/06/2014 - 05:38 | 4407147 orangegeek
orangegeek's picture

Looks like another push down for the S&P before any corrective move up begins

Thu, 02/06/2014 - 04:58 | 4407136 GK
GK's picture

The Vix sell signal from 1840 SPX is still active.

Thu, 02/06/2014 - 00:40 | 4406895 Music101
Music101's picture

Is the VIX really still relevant? ... not sure. See Below:

Wed, 02/05/2014 - 14:38 | 4404627 Fuh Querada
Fuh Querada's picture

I would suggest inserting your VIX into your fourth intermediate bottom, then rolling over your indicator.

Thu, 02/06/2014 - 04:10 | 4407112 kurt
kurt's picture

Don't put vicks in your bottom!

Wed, 02/05/2014 - 16:35 | 4405293 TheInfoman
TheInfoman's picture

For us un-technicals, what would doing that mean to you short term forecast?

Wed, 02/05/2014 - 18:19 | 4405744 Fuh Querada
Fuh Querada's picture

My forecast is that the trends described here will continue in the short term,
unless they level off or reverse.

Wed, 02/05/2014 - 14:34 | 4404596 pupdog1
pupdog1's picture

Support is support until it isn't.

Wed, 02/05/2014 - 13:49 | 4404436 ms8172
ms8172's picture

This downturn is nothing compared what is yet to come!!

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