VIX and S&P 500 Sport Bearish (for S&P) Divergence
The VIX (VXX) generally moves in the opposite direction as the S&P 500 (SPY).
However, since mid-February the VIX and S&P 500 have been moving higher concurrently. This is unusual and something’s gotta give.
Either the VIX or the S&P 500 will have to break down. Which one will it be?
View enlarged VIX / S&P 500 chart here
The March 20 Profit Radar Report featured the chart above along with the following observation:
“There were only two recent instances where the S&P and VIX moved higher concurrently for longer than a week or two. Both led to a small decline followed by a resumption of the rally.”
Today’s dip is a step towards restoring the historic correlation between the VIX and S&P.
Another piece of analysis – in fact, this is probably the most rudimentary approach to price analysis – also suggests a bit more pain ahead for stocks.
More details here: The Most Basic S&P 500 Indicator Turns ‘Red’
Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.
More From iSPYETF
Is Investor Sentiment Bullish Enough for a Major Market Top?
Historical Fact: March Triple Witching Sends S&P 500 Lower
Gold Rally -" New Bull Market or Bull Trap?