The VIX just dipped to a support cluster going back to March 2013.
The chart below shows general support at 12.05 (horizontal green line) and rising trend line support, also at 12.05. The lower Bollinger Band is currently at 12.06.
The April 23 Profit Radar Report referred to this cluster when it stated that: “Double trend line support is at 12.70 – 12.”
‘Double trend line support’ referred to the longer rising green trend line and the dashed green trend line.
On Monday the VIX (Chicago Options: ^VIX) gapped below the dashed line. It is quite common that important support levels are taken out via overnight gaps.
Judging by the chart, the VIX (VXX) considers support right around 12 as important.
The confluence of support around 12 was one of the reasons the Profit Radar Report expected a stock rally and new all-time highs for the S&P 500 (SPY).
Another reason to expect new highs was because nobody else did. The May 4 Profit Radar Report stated that: “We favor a shallow dip to 1,874 – 1,850 followed by a pop to 1,9xx (exact level reserved for subscribers) before we see a 10%+ correction.”
Judging by the VIX, the S&P 500 is near a possible inflection point. However, this ‘force’ could drive stocks higher (and the VIX lower) if our target is surpassed. It’s counter intuitive, but it predicted this week’s pop.
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.
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