In 2022, each time the VIX dipped under 20, within a week a market selloff began.
Last week, it seemed like the same story was unfolding. With SPX hitting resistance around 4,000 and at the declining trendline from the all-time high, combined with low VIX, the market was ripe for a selloff.
However, this week, VIX topped out under 22 and now is back under 20. Simultaneously, SPX found support near prior resistance after a mild pullback.
VIX has been in a clear downtrend on the daily chart, hitting resistance at its 50-day moving average three times in December and then again yesterday.
IF the VIX manages to stay under 20 and SPX resumes its uptrend, it could represent a change in tone that could propel the market higher in the intermediate term.
Of course, all the data can change on Monday and throw a wrench into this thesis, but for the first time in a long time, I'm seeing potential for a sustained uptrend.
Any thoughts on what message the VIX is sending?
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