What to Watch Next Week: The VIX

• Posted by Greg Harmon
• on October 3rd, 2014

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The Volatility Index has been a key tell on the S&P 500 for the last 2 years. The chart below shows that over that time period it has given 14 signals that the S&P 500 will move to a new all-time high. The details of the signal are:

1. A spike in the Volatility Index over the 20, 50, 100 and 200 day SMA
2. A pullback under all four moving averages
3. The RSI turning back lower
4. A Spike in the MACD reversing and crossing down

Each of the last 14 times this has happened the S&P 500 has gone on to make a new all-time high. This combination makes logical sense as a booster for the S&P 500. Volatility spiked but then 3 indications give a Volatility sell signal. Keep your eyes on this next week as the VIX spike has happened already this week. The RSI and MACD are turning lower but have not yet triggered. And the VIX only needs to move below 12.71 as the final trigger. With the reversal higher confirmed in the S&P 500 Friday, the index is already moving in the right direction.

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