12/07/2008

VIX pattern portends futher SPX decline

The stock market is beginning to show bullish signs as I pointed out here. However, it appears that the same indicators I'm watching are being noticed by the majority of the blogosphere; many bloggers are turning bullish very quickly, which is not a good sign. The VIX is showing a potential pattern that is very bearish for the market, so I will be cautious about being too bullish next week.

Notice the triangle pattern that is forming on the VIX. Triangles are corrective patterns that normally occur before the terminal thrust of a trend, which is an uptrend in this case. That means we could see one more thrust up to a new trend high. Obviously, this would likely imply a new low for the stock market. Monday's market action will be telling about what comes next.

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