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Thursday, November 8, 2012


We have an interesting setup on the VIX with the current pullback.  Here is the weekly chart.

This is the sixth time since the 2009 low that the weekly 6 SMA has crossed above the 18 SMA marked by the yellow arrows.  The yellow line marks the lowest VIX reading that marked a VIX peak.  That was in the spring correction at 27.73.   Unless it is different this time, we should see a VIX reading at least 27 before we make the next low.   If you look at the chart closely you will notice that every other cross led to a VIX reading above 40 before the low was made.  We are in that situation now.  In 2011, there was a rally that took the VIX back below the 18 SMA, but the market still tanked 20% from the high.  In this situation, I think we need to see the VIX below the 18 SMA long enough to clearly turn the 6 SMA back down or a reading of 27 before considering a low may be in.  Just keep in the back of your mind we may need to see the VIX above 40 again.  Yesterday's potential break away gap to the down side makes that a real possibility.  In the mean time, longs should be viewed as swing trades with a quick exit trigger.  Repeat after me, sell rallies, sell rallies, sell rallies.


1 comment:

Anonymous said...

Sell rallies. Sell rallies. Sell rallies


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