VIX: Charting Your Stress Levels...

02/25/09 01:07PM EST
Make no mistake, we are in a bear market and it is to be traded, aggressively.

Below I have drawn the “Trend” line for the VIX. Trend, in our models, means intermediate term. Intermediate term Trends matter in this market, especially when those Trends come under assault. On Monday, we took a good hard look at a breakout in volatility. Yesterday, the VIX faded right at its formidable Trend line of resistance. Stress levels came down and we found a real rally, on real volume, as a result.

The line in the sand here is at the 51.94. Today, the VIX is only up a percent to 46. On the margin, that’s relatively low stress given the down move we are seeing in equities. This could change however – and in a hurry – so stay in sync with me on 51.94, with the proactive plan to be covering/buying US stocks again on a breakdown in the SP500 below the 730 line, provided that this lower high in the VIX stays intact.

If the VIX closes above 51.94, those stress levels of 65-80 VIX of October/November will be in play.

Keith R. McCullough
CEO & Chief Investment Officer
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