by SP Joe

Finally the Greek elections have come out this weekend and the World Europe is saved.  Well maybe not but the markets finally got over another speed bump.  Last week we saw a rise in volatility as insurance was being bought up to protect against weekend news.  We noticed several correlation breaks between the VIX and the S&P 500.  VIX lost its bid when rumors started to fly from overseas.

Monday after the big “bust” from the weekend we saw traders trying to cover those insurance plays.  The morning started off slow with a slightly down market, yet we also had a slightly down VIX.  This gave away to the great rug pull in volatility as VIX came crashing down 13% today.  With nothing ‘major’ on the horizon we should see a decreased volatility, at least in the near future.  

by SP Joe

The VIX (fear gauge) and SPX (S&P 500) correlation is a simple one.  If the market is down and the VIX is also down this is a good bullish sign.  If the market is up and the VIX is up, like we saw yesterday, this is a good bearish sign.  

The VIX should be watched by all traders.  You do not have to watch it during the day but at least take a glance of it at night when you are doing your charting.  If you would have done that over the last couple of days you would have known we are bearish in this market.

Let’s take a look at the charts.

by SP Joe

Last week was the best week in 2012 for the markets.  We laid out the bull case last week and it played out perfectly, but where do we go now?  Again I laid out the bull, bear, and neutral case going forward.  We are still caught in a downtrend but another push will break us of those levels.  Look for the bulls to come on strong before consolidating at 1340.  The bears need to go ahead and start the sell of now to take advantage of the downtrend.  The market is already short term overbought so sideways action would be good here.  A lot of news coming from overseas is going to guide this market. Be careful for sell the news types of events.  How much was the good news already priced in?