At the Summit? – Part Two

Evidence from the sentiment dimension gives clues to a potential S&P 500 (SPX) top.

The daily SPX and VIX chart courtesy of Trading View updates their relationship.

Many traders/analysts believe that the VIX making a new low is a bearish signal for the SPX. However, most of the time SPX tops are made when the VIX is making a higher bottom.   This phenomenon shows a subtle shift sentiment in favor of the bears.

When doing VIX/SPX comparisons start with the prior most significant VIX peak, which in this case was in March 2023.  The low point of the VIX trend occurred on 06/22/23.  Then on 06/30/23 with a new SPX  high, VIX had a higher bottom.

VIX indicators are also signaling it could soon rise – with a corresponding SPX drop.

The daily VIX – RSI  and VIX – MACD both have bullish divergences.  Additionally, VIX – RSI has moved above its moving average line.   VIX – MACD has bullish lines cross.

The most significant signal could occur if VIX  moves above the declining trendline from its March 2023 peak.

The daily Put/Call (PC) chart shows it’s also trending higher.

Again, an important signal could occur on a break above the declining trendline. 

July 3, 2023 is a shortened stock trading session because of the upcoming  U.S. Independence day holiday.  This factor plus the completed “portfolio window dressing”  on 06/30/23 means little or no big money trading on 07/03/23.   The 2023 edition of “Stock Traders Almanac” lists 07/03/23 as statistically bullish – up 29 out of  the last 33 years.

When big money is away it almost always results in a narrow trading range.  If the SPX makes a new post October 2022 rally high it could be  marginal.  

A new SPX high on 07/03/23 could be its 2023 summit.