Something Interesting Happened on the Way...

to the bank. You've heard that expression before. We'll that was yesterday. As most of you should know the VIX is an inverse indicator that we use for confirmation of market action. Specifically the VIX is calculated from S&P options volatility. The inverse confirmaiton is that if the S&P is up the VIX should be down and if the S&P is down the VIX should be up. This concept works like a seesaw with the S&P on one end and the VIX on the other. Most of the time the VIX works exactly as it should inversely confirming what the S&P is doing. Everyone once in a while the VIX doesn't confirm and instead it gives non-confirmation. This non-confirmation, when it occurs, can be an advance warning of a move in the opposite direction. While we were doing our mega-audio commentary yesterday morning, oil was up and the markets were lower and the VIX was lower, giving us one of those non-confirmations. Oil was up two, then three, then four dollars in the morning, the markets were off and yet the VIX just did not go up. By the end of the day oil was up over $5 and the DJIA and SPX had limped into positive territory, really just breakeven and the VIX was still negative for the day. All day long the VIX gave this non-confirmation. Last night in our audio commentary we discussed this non-confirmation and warned to be cautious of the bottoming signals that had occured in commodity related stocks like oil, coa, gold and Ag stocks. The technical chart signals were there but the VIX just wasn't confirming. In essence the VIX seemed to be saying that even though oil was up $5, options buyers were not aggressively buying puts to drive volatilty higher. Why not? Well apparently they believed the larger macro-factors driving the trend of oil down had more weight that the U.S./Russia tensions that seemed to fuel oil prices higher yesterday. We also pointed out that the steels also were down for the day and that if the commodity move was a lasting move that one would expect the steels to be moving up also. In effect the steels were also giving non-confirmation. We reflected this issue in our post Thursday night in the Stock Commentary Down Trending portion. Well as I am sure you are aware, this morning we saw exactly what the VIX was telling us yesterday. Oil is down this morning, commodity related stocks are also down and the markets are moving up nicely and we are seeing a lot of the those bull flags we commented on last night bouncing this morning. Just goes to prove the technical evidence is there if we are just willing to pay attention to the Chart Signals. 10:36 ET DJIA +191...SPX +14...Nasdaq +29...RUT +10...SOX +4 Oil -$2.18...Gold -$6.70 All Sectors except XLE are positive at this time. Friday's Early Action Moving Up: STRA, DECK, AAPL, NIHD, PCLN, AMZN, MS, IBM, UAUA, FMCN, PNRA, CELF, INFY, LCC, NDAQ, KMT, MA, SINA, SCHN, GS, BIDU, LEH, SOHU, V, MER, EXPE Moving Down: DRYS, BUCY, FSLR, X, IPI, POT, MOS, POT, AGU, AEM, BTU, MEE, MON, MTL, LDK Well be back a little latter with more comments on the unfolding support bounce in the markets...