How do we reconcile the low VIX with the breakout? If the VIX can drop with the market it can certainly rise with it. That hasn’t happened yet but they do call it a wall of worry. More importantly, if we are starting a new sequence of complacency and euphoria and the VIX declines, it could drop to levels of other long term highs by the time the SPX gets near 2011 highs assuming it gets that far. If that were to happen in 2012 we’d most likely be looking at a double top. IF that were to happen then we could start worrying about Europe again. Of course, Friday’s breakthrough might just be a low volume holiday trading freak of nature. But once again, if the market really wanted to go down, it would go down. Thus far, markets have either bottomed close to the 610 day window in August, close to the 610 window in October (from the January 2000 top in the Dow) or the 161 day window to the May peak this year. It doesn’t surprise me we are going higher.
This week we should see a continuation of the holiday type trading and we should still end up with another melt up.
Click charts to enlarge
Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.