Monday, May 11, 2015

Doesn’t the VIX Say Higher S&P’s?

Marty, I read your note ‘S&P; Half-Hearted Efforts Don't Make Bullish Case’ and can understand that no bullish break-out has been made ‘yet’, but what about the sell-off in the VIX on Friday?  Doesn’t that suggest higher S&P’s?

Response:  That is a good point made on the VIX and I would have to agree that the 15% decline in the VIX on Friday with the gap lower and settle near to the session low was impressive.  However, I would also note that the bullish window from early December remains open and should be expected to offer the VIX strong support.  I am additionally impressed with the bullish inverted hammer on April 24th, a session where the S&P formed a bearish spinning top and was day 1 of a two session bearish engulfing.  Further, on May 5th, the VIX formed a bullish hammer with  a new multi-month low reached.  The above suggest that the VIX is not ready to pull back to lower levels and that there is room for an additional and possible higher spike than seen last week.  

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