The Volatility index (VIX) is often referred to as the fear gauge. Unless you have been underground since Covid i’m sure you have noticed that the market is at all time highs. One of the biggest reasons for this is the fed printing money like there is no tomorrow. However, tapering is on the horizon (its just a matter of when) so what is next for S&P 500?
The S&P500 has dropped to 4450 in from it’s all time highs of 4550. What’s interesting is since Fed’s Kaplan and Rosengren announced they were selling all their stocks due to ethical concerns ( give me a break, all of a sudden they talk about ethics when at that point the market was 1% off all time highs) the s&p500 has been selling off. September also is historically the weakest month. Whatever the reason pay attention to the VIX. If the VIX reading gets above 20 things may start to get a little ugly . A reading of 25 things are getting serious and over 50 panic button.
Over the past 3 days the VIX has tried to get above 20 however, the last 2 days just closing below. Something I use to judge momentum is the ADX. If the ADX has a reading of 20+ I start to pay attention and track it every day. Since the 2nd of September there has been a gradual increase in the ADX value which signifies to me that momentum is building.
I will be paying very close attention to the VIX over the next few weeks as it will be a good indicator for me on how long I hold on to my short SP500 position. As for now I hold.