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Tuesday, July 16, 2013

Vix golden cross

In VIX on 6/24 I wrote "If history repeats for this bull market we should have made a weekly closing low last week.  If the VIX closes above the 200 this week then it will be different this time from any other correction in this bull market.  If we end higher this week, but break last weeks low before we make new highs that would also be different. It seems like every time I point out a pattern in this blog the market does something different.  Will that be the case again? "

For once I pointed out something and it actually happened.  SPX did indeed make new closing highs.
Check out the current VIX chart.

The 50 SMA (purple line) has crossed above the 200 SMA (green line).  There have only been two other crossings in this bull market.  Those were during the big 2010 and 2011 sell offs.  This is the first time this has happened while SPX was at a new closing high.  The other occurrences were when the VIX was spiking as the market was selling off.  It is too soon to tell if this means we are headed for a pick in volatility or just a temporary blip.  If the VIX crosses that 50 SMA (15.26) again it would increase the odds that volatility is really on the rise.  That does not necessarily mean the market will go down.  Both stocks and volatility can increase together.  However, daily moves would be likely to get bigger.  That could include deeper pullbacks as well.


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