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(4/15/17)
The VIX looks like it will rally back to its longer term
downward trend line in the upper teens. As we have seen since early 2016
the VIX has been making a series of lower highs and lower lows. This has
allowed the S&P 500 to continue to make new all time highs the past
year.
Naturally many investors probably expect the same thing to
happen again as the VIX would stall out in the upper teens and then make another
lower low in the single digits. Thus this would allow for the S&P 500
to make another new high at some point.
If the VIX rises into the upper teens and stalls out the S&P
500 probably would hold support at one of two levels. The first support
area is around 2300 which is near its 100 Day Moving Average (blue
line). Meanwhile the second support level would be along its upward
trend line (purple line) which is approaching the 2275 area.
Meanwhile, if the market is going to make one more high after
this current pullback, I would count the wave structure as shown below using the
Dow. The current pullback would be Wave 4 of 5 which would be followed by
a 5th Wave to complete the pattern with a target around 22,000 in the Dow.
Keep in mind this would be the bullish scenario.
However if the VIX were to break above its downward trend line
then that would lead to a larger correction as the VIX would rally into the
lower to mid 20's. This would lead to a potential drop back to the S&P
500's 200 Day Moving Average (blue line) near 2230.
Amateur Investors
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