VIX Continues to Give a Bearish Signal

Today 01/20/21 the S&P 500 SPX made another new all-time high while the CBOE Volatility Index (VIX) continued to give a bearish divergence vs. its late November 2020 bottom.  This divergence was noted in the 01/09/21 post “Early January  Sentiment and Momentum Signals”.

Today the VIX held at the same level 21.40 as made at the prior SPX all-time high made on 01/08/21. The VIX rises when there’s an increase in purchases of Put options on the SPX. Put options are downside bets and are commonly used as a hedge for stock holdings.  Puts are like insurance against potential losses.  When a stock or stock index rises, typically fund managers will want to decrease the cost of insurance – Puts.  Todays divergence indicates fund managers are still concern about a near-term broader stock market decline.

Today the SPX daily RSI and MACD also had bearish divergences.  The NYSE – New 52 – Week Highs now has a bearish divergence vs. it’s 01/07/21 peak.

Traders are 50% short non-leveraged SPX related funds as the open 01/07/21. Continue holding short.

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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