Friday, July 30, 2010

VIX: Time to Take a Good Look.

It is not difficult to recognize the correlation between declining markets and rising volatility. Panic is usually accompanied by chaos (the non mathematical interpretation) while bullish exuberance is eventually replaced with audacity and complacency.
The 200 day moving average, which is a proxy for the general sentiment in the market currently stands at 23.39%. Thursdays close was 24.13%. If the markets are going to begin another decline the VIX will be very sensitive to the probability of this occurring. Therefore, it would be prudent to monitor this index closely over the next week when several harmonic cycles and planetary phenomena occur. (July 26-Aug. 9th)
On April 27th--one day after this year's high--the VIX broke above the higher end of its trading range at 18.40% and proceeded to spike to 45% during the silliness in May. A similar event could take place here, albeit at a higher level if the markets were to turn down and the 'pros' shifted there 'market view' accordingly. A sharp move and daily close above 26.25% may be a clue as to a possible breakdown in the market--especially if this is accompanied by a S&P close below 1070.

Click the Squiggly Lines logo to the left to monitor solar activity. There is a correlation between solar activity and market volatility; ergo market direction.

Support-Resistance for Friday July 30, 2010
R2 1126.50
R1 1114.01
Pivot Point 1103.42
S1 1090.93
S2 1080.34

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