THE FEAR INDEX. That’s what most analysts call the VIX, the S&P 500 Volatility Index. Dr. Bart DiLiddo, Founder of VectorVest, calls it the “Anxiety Index”. In his 8/28/2015 essay in the VectorVest Views, Dr. DiLiddo wrote, “IT IS IMPERATIVE THAT YOU KNOW THAT THE VIX GOES DOWN WHEN THE MARKET GOES UP AND VICE-VERSA. As the saying goes, When the VIX is low, it’s time to go. When the VIX is high, it’s time to buy.”
In The Week Ahead video, I show the price of the VIX is at a significant support low. So it may time to go, or at least trade with caution. As the chart below shows, several times in the last five years when VIX was near or at this support low, it bounced higher. From here, the VIX is most likely to go up, and therefore the market down. VectorVest’s Market Timing videos Friday in both Canada and US urged caution, and that’s the main message in my Week Ahead Video. I also show how top VST, Midas Touch and other top stocks have been behaving in this market.
Of course the market could always break out to the upside, and certain industry groups may outperform, but as VectorVest likes to say, downside risk outweighs upside potential. So as VectorVest US stated in the Strategy section, “With the Presidential Inauguration next week and the Price of the VectorVest Composite Index in uncharted territory, exercise caution when making new trades and pay attention to your Stops.”
Hard to know what effect if any the inauguration will have on the markets, but as VectorVest pointed out in Friday’s Canada Market in Review section, “The TSX finished lower Thursday as President-elect Donald Trump’s news conference failed to inspire investors.”
Earnings reporting swings into full gear next week, so more uncertainty to add to investor’s anxiety.
TUESDAY’s Q&A WEBINAR – YOU’RE INVITED. We’ll study the markets in RealTime and discuss all of the above as well as Friday’s SOTW Video during our weekly Q&A webinar Tuesday, Jan. 17 at 12:30 pm Eastern / 9:30 am Pacific. CLICK HERE TO REGISTER.
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P.S. In case you missed our Jan. 7 International Online Forum, or you would like to review, click here for the replay.
Posted by Stan Heller, Consultant, VectorVest Canada
DISCLAIMER: The information contained in this Blog is for education and information purposes only. Example trades must not be considered as recommendations. You should always do your own analysis and invest based on your own risk tolerance, investment style, goals and time horizon. There are risks involved in investing and only you know your financial situation, risk tolerance, financial goals and time horizon.