[Platinum insights] Why we might have another sell off soon!

This morning we are watching the S&P 500 as price action closes in on the 200-day SMA. 

The ability of this index price action to cross above and maintain this level would be a strong bullish signal. We have a positive MACD and SS along with positive momentum in the RSI on the daily chart. We have also seen several days of rising price action, however on decreasing volume.  

However, as we zoom the daily chart out over the past year, you can see we were able to trade above the 200-day SMA in March for about 11 days, but could not maintain that bullish trend and fell below the 200-day SMA. We once again saw price action approach and touch the 200-day SMA on August 16th, only to see another sell off in the S&P. T

oday, prior to market open, we are a mere 32.5 points from crossing the 200-day SMA.  Mant traders use the VIX (volatility index) to predict the direction of price action in the markets. As a rule of thumb, when the VIX is above 35, the expectation is that the market is close to a bottom and will show bullish price action. 

On the flip side, when the VIX is below 20, the market is close to selling off. As you can see in the chart of the S&P in March and August, the VIX was below 20 both times and we saw a market sell off.  Over the past couple of days, we have seen the VIX trade from 20.32 – 20.80. Keep an eye on this to see if this indicator once again predicts a market sell off. HAVE a Great Day!  

This information is being provided for educational purposes only and is not a recommendation to buy or sell a security.