Why I’ve been Scared of the Market the Past Few Weeks…

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If you want to know why I am so nervous about the market the last few weeks I can sum it up in one chart.

What you are seeing is a chart, on top is the S&P 500 rising all month…About 200 points.

What you are seeing on the bottom is a chart of the VIX index over the same period of time.

Over the last month it is lower.

BUT over the last couple of weeks we have seen the VIX index do NOTHING.

For long time readers of mine, you know that one of the 4 major factors I look at in my traffic light is VIX correlation.

Right now VIX correlation is the only major indicator in VIX that is not in the Red, it is yellow.

I can have the traffic light be red with 3 reds and a yellow.

If we start to see the VIX actually rally (this is something that DID happen in February 2020 and in January 2018) then my stock market signal could quickly warn us of danger ahead by changing to yellow or even green.

VIX correlation is about as important as the structure of the curve when formulating my traffic signal.

With the run we have had, the disconnect between the real economy/ the stock market, US-China tensions, AND civil unrest in the United States…

I think we have a tinderbox, we have thrown a BUNCH of matches at it and nothing has lit…YET!

We are pressing our luck.

The VIX Traffic Light is Red.

Your Only Option,

Mark

PS – Some of the biggest gains occur when my traffic light changes colors, especially to red! Volatility Edge kills it and helps accounts make large and quick gains in those kinds of scary times. I’m shutting this down at the end of the week so get in before the next light change!

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