Home > Uncategorized > Using the $VIX to predict SPY price action

Using the $VIX to predict SPY price action

blogRecently I have not been able to rely on the NYSE Trin Index for market direction. I have read in a few different trade publications that the concentration of volume in  only a few names has caused the poor readings in the old reliable short-term technical analysis breadth indicator.

This has sent me in search of a better indicator for market direction. What I found was that the CBOE Volatility Index ($VIX) has  provided an early warning signal on overall market direction. I  overlayed my SPY chart with the VIX and found a direct inverse correlation in price movement.

I have found that the VIX Index has actually moved before the markets and enabled me to tighten a stop on a position and be ready for a possible reversal in price action. The best part is that it works on all time frames. When the markets are trending you will notice the movement is very obvious and on range bound days the VIX Index will just chop around.

http://www.keystonetradinggroup.com

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