Don't Ignore This Chart!

Volatility ($VIX) Nearing Key Breakout As S&P 500 Nears Support

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Volatility and S&P 500 performance tend to move in opposite directions.  As fear escalates and the VIX prices in higher expected volatility, equity markets sell off.  Currently, the VIX is nearing its recent resistance near 30, which is a very high level of expected volatility, one in which we can expect large, sudden directional shifts in stock prices - mostly impulsive moves to the downside.  Should the VIX clear 30 resistance, expect S&P 500 support just above 1800 to break.  That could potentially lead to more panicked market behavior as traders nerves are frayed.  Here's the current look at both the VIX and SPX as we hit the mid-point of today's trading:

If on the short side, it certainly makes sense to at least consider taking partial profits as 1800 is an area the market could once again bounce from.  Clearly, a break below price support would be bearish though as volume is extraordinarily high.  Prepare yourself for a heavy dose of whipsaw action.

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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