• 3 hours $15,000 For Your Crypto’s Ticket To Visibility
  • 1 day The Next Fashion Frontier
  • 2 days What Is Africa’s Role In The New Silk Road?
  • 3 days Trump Was Right About The Dollar
  • 3 days Is Silver Gearing Up For A Rally?
  • 3 days World’s Largest Hedge Fund Turns Bullish On Gold
  • 3 days It’s Time To Spend More On Clean Energy R&D
  • 4 days Contrarian Investors Are Beating The Stock Market
  • 4 days Bulgaria’s Revenue Agency Falls Victim To Biggest Cyber Heist In History
  • 4 days Amazon Faces European Union Anti-Trust Probe
  • 4 days Commodities Are Having A Stellar Year
  • 5 days Bezos’ Next Big Project Could Be Worth $100 Billion Per Year
  • 5 days 3,600 Years Later, Climate Change Turns Mammoths Into $40M Market
  • 5 days Tesla, Apple Claim China Is Stealing Intellectual Property
  • 5 days EV Giants Duke It Out For Battery Dominance
  • 6 days Tech Billionaire Takes Aim At Google
  • 6 days Chinese Police Bust Largest Ever Illicit Crypto Mining Operation
  • 6 days Expect A Pullback Before Gold's Next Major Rally
  • 6 days Why Interest On Gold Matters
  • 7 days Ten Extravagant Food Items For The Wealthy Only
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

  1. Home
  2. Markets
  3. Other

What Is The VIX Fear Index Telling Us Now?

Supply And Demand

When you get down to brass tacks, asset prices are governed by supply and demand. In the markets, the conviction of buyers relative to the conviction of sellers also plays a major role. Therefore, "I am confident" vs. "I am nervous" ratios can help us monitor and manage investment risk. What is the market telling us now?

Confident vs. Nervous

One confident vs. nervous ratio, the S&P 500 relative to the VIX, is shown below. When the ratio was pushed back at resistance (see point A), weakness in stocks followed (bottom of chart). Conversely, when the ratio cleared resistance (point B), good things happened in the stock market. Last Friday (before the FED), the ratio was revisiting the horizontal blue line, meaning it was at a possible inflection point (see point C).

$SPX:$VIX S&P 500/Volatility (New) INDX

Support Is Holding In Bullish Manner

As of Thursday, September 18, the ratio was bouncing in favor of the economic and stock market bulls. When the ratio is above the blue horizontal lines, bullish odds are more favorable. Our concerns would increase if support is broken near point C. On a weekly chart, Friday's close is much more important than Thursday's. Therefore, we will be monitoring the look of the chart over the next few days.

$SPX:$VIX S&P 500/Volatility (New) INDX

Investment Implications - The Weight Of The Evidence

On September 16, we asked is a big move coming soon in stocks? Subsequently, the S&P 500 cleared short-term resistance, which improved the odds of a rally taking place this week. The evidence, including the S&P-to-VIX ratio, has improved this week. With an improving risk-reward profile, our market model called for a chess move on September 18 (see tweet below).

Ciovacco Tweet: CCM Market Model

The S&P 500 is up 25 points this week as of Thursday's close. Friday brings a very light economic calendar. If the improvement in the evidence holds into the weekend, our model will most likely call for another "add" to the equity side of our portfolios. We will head into Friday's session with an open and flexible mind.


Back to homepage

Leave a comment

Leave a comment