A Setup for the VIX

Monday was a day for buying tails (reversals from highs). Today we've seen just the opposite. After a nasty drop in many names earlier in the day (although still just a moderate drop for most indices), we are seeing a few stage reversals. Energy names have even peaked into the green on a decent scale. Bulls couldn't fight the reversals yesterday, so I'll be interested to see if the bears have more luck today. In all fairness, many momentum names were already weak yesterday, so the closing action today is very important.

The Volatility Index (VIX) has suddenly caught people's attention again. I drew up the chart on July 1 looking for a run to the low 10s with a CCI moving below -100 before I thought we'd see any bounce in volatility and a selloff in equities. We did see the VIX head down to 10.28 with a CCI breaking below 100 last Thursday. In just two days, we saw a 24% change from lows to highs with the market taking a small hit. This pattern has now been successful six out of the last seven times since April for solid moves in the VIX. If you don't have an alert for this one and volatility intrigues you, then set one for an RSI below 50, CCI below -100 and a VIX at or very near the bottom of its Bollinger Band range using some like a less than 0.25 on Bollinger %B....169 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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