VIX Daily and Weekly Charts and TA Shows 6-Year Low and Significant Market Top
The drop in volatility is historic. The bottom fell out last week with the VIX now at levels not seen since the market top in 2007, six years ago. The red lines show the ongoing falling wedge vibe on both the daily and weekly charts. The VIX is testing critical support levels from early 2007 so this is a logical place for a bounce. The green lines show positive divergence in place for the weekly chart. Likewise the daily chart, but the momo market move higher, VIX lower, last week, may need time to settle. A low VIX signals complacency and no fear or worry in the markets. Traders are not buying volatility since no one believes the markets will go down. The central bankers trained everyone well. The debt ceiling resolution rumor on Thursday catapulted markets so much of the melt-up last week was due to happy political resolutions like the fiscal cliff to start the year. There is zero downside priced into markets for any negative political outcome. The politicians will meet all the deadlines coming and keep kicking the can down the road so traders are not concerned about any that either.
The Fed and ECB are printing money, now the BOJ, the race to debase now beginning currency wars. But as far as markets go, the wine is flowing like water, earnings are starting out on a positive tone, the Housing Starts were blow-out, the Jobless Claims are at lows, and AAPL will likely announce stellar earnings on Wednesday. Perhaps traders are already pricing in happy Apple news as well. Large funds are stepping on volatility's neck holding it down while they can distribute to Joe Sixpack, then they will lift their foot. Other agents can pressure the VIX lower to help fulfill the Fed's game plan. VIX says we are at a significant market top, and a volatility launch may occur at anytime, but, tell that to the SPX. Projection is for a much higher VIX in 2013 which is reflective of lower equity markets in 2013.
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