I am no expert on the VIX. In fact, most of you probably know by now that the only time I have a strong view on the Volatility Index (VIX) is when it gets jumpy, as it did two weeks ago. As long time readers know when the VIX gets jumpy, it is my view the market has seen a low.
What I found curious about the VIX on Monday was that despite the 12-point dive on the S&P early in the morning, the VIX could not only not get over 18, it could not get over Friday's high. And then it closed smack on the low. I realize this is a bit of micro-managing but my point is that typically, once we see the VIX get jumpy and it starts to sink, it then has a tendency to grind lower.
For that reason, keep your eyes on 16 and 18 as they have been the limits on the upside and downside for the last week so any move outside of those levels is a change. We already know that my bias is for pullbacks in the market to lead to another rally, so my bias on the VIX is for it to head lower over time.
But of course volatility wasn't the top du jour, oil was. First it was Goldman Sachs (GS) who decided to pour cold water on it with a target five dollars lower six months from now. I realize I have been wrong on oil in the last few weeks, having turned sour on it in June when everyone loved it, at $88 I thought it had seen enough downside and therefore have been wrong. But to fuss over what amounts to a call for a move of less than 10% six months from now seems a bit late to me.
Then in the afternoon CNBC fussed over a market commentator's view that oil was going to ten bucks a barrel. Okay, he backtracked a bit on that call, but the truth is that these are not the kinds of calls we hear at highs, are they?
Oil has been toying with this $80 level for two weeks now and all eyes are on it, for a potential break down. I think oil had the chance to break down on Monday and rallied back instead. It's not as if it went anywhere special, more that it refused to go down more. If oil can hold over this $80-ish level, but more so, if it can get over $82.50 it changes the chart from one in a downtrend to one trying to bottom.
Clearly a solid break under that small trend line is bearish, but on Monday it put in a higher low so now the test is if it can put in a higher high.
For the market as a whole, it remains short-term overbought. Monday's pullback helped in terms of working off the overbought reading. My view continues to be that we should pull back and then rally again.
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At the time of publication, Helene Meisler had no positions in any of the securities mentioned.