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(5/27/17)
The VIX has dropped right back where it was a few weeks ago as
the S&P 500 has risen 7 days in a row. Of course the last time the VIX
was this low there was a small correction (points A to B).
Meanwhile taking a look at a 20 year chart of the VIX, on a
monthly closing basis, notice it's currently at a 20 year low. Furthermore
there has been a long term downward channel going all the way back to early
2009. Each time the top of the downward channel has been tested, the VIX
has dropped back to the lower part of the channel (points C to D), which has
been followed by a surge higher in the S&P 500 (points E to F).
With the VIX now back at the bottom of its downward channel, the
question is, will it reverse and eventually rise back to the top of the
channel? Notice the last two times the VIX rallied to the top of its
downward channel (points G to H) the S&P 500 dropped back to its upward
trend line from the 2009 low (points I to J).
Finally the last thing I would like to point out is that the the
S&P 500 has risen 1700 points in 8 years. Keep in mind it took 25
years (1975 to 2000) for it to rise 1400 points. The market is
clearly exhibiting a parabolic move from the 2009 low and in the long run this
will not end well.
Amateur Investors
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