Courtesy of John Nyaradi.
The VIX, the CBOE “fear indicator” flashes mixed short term, long term signals.
The VIX (NYSEARCA:VXX) is a widely watched indicator that people study to determine the future direction of stock prices. When VIX, or fear, declines, stock prices are expected to rally and when VIX (NYSEARCA:VXX) and fear are on the increase, stock prices are likely to decline.
A quick look at a couple of charts gives us a good indication of what the VIX says about markets today:
chart courtesy of www.stockcharts.com
In the chart of the VIX above, we can see that the VIX has been in a sustained downtrend since late in 2011 on a daily basis which corresponds to the recent rise in stock prices. However, just recently, daily MACD, representing short term momentum, has turned up which would indicate the potential for higher VIX/lower stock prices ahead.
chart courtesy of www.stockcharts.com
The weekly chart of VIX (NYSEARCA:VXX) gives a longer term view of VIX and here the trend is clearly down which would indicate that stock and ETF prices should be rising.
chart courtesy of www.stockcharts.com
Finally the point and figure chart shows VIX to be on a “sell” signal so on a longer term time frame, VIX, or fear is in decline and stock prices are in an uptrend.
Bottom line: Short term VIX (NYSEARCA:VXX) action points to sideways consolidation or a short correction in stock prices while longer term indicators indicate declining fear and rising stock prices is the most probable scenario.
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