$VIX 5EMA with $SPX

2014年12月5日

The idea of this chart is that when the VIX 5EMA gets down into the lower two horizontal yellow lines, it's time to get ready for some kind of market reversal. This chart has worked well for quite a long period of time in indicating when the markets were getting a little too overheated and were prime for a pullback of one degree or another. However, it should be obvious that in June and July the 5EMA dropped lower than the two horizontal yellow bars without predicting a pullback. Based on the failure of this setup back in June and July, I could adjust those two lower lines down a little, but I'm not going to because this chart worked very well in late September ahead of the decline into the October lows.

Here's how I'm interpreting this chart now: The markets are getting stretched, The RSI on SPX has been above 70 various times over the past 10 or so sessions which indicates an overbought market. And we're seeing weakness in the Summation Index. Nothing major but still weakness in the Summation Index is never a good thing.

For the moment, and based on the way the market has been acting lately, I would have to expect that the SPX will push higher and this, in turn, will push the VIX 5EMA lower and perhaps through the the bottom yellow line. If that bottom yellow line does in fact get pierced, then I'd be on the lookout for some kind of give back to start within a few sessions.

And I could be completely and absolutely wrong.

Be careful and GL.