Volatility Indexes Sending A Bullish Signal To Stock Market Investors
Leading indicators that send signals about emerging trends across (global) markets is what we are focused on in our research. One of our leading indicators is a set of 6 distinct volatility indexes, which we feature every weekend in our Trade Alerts premium research service (weekend commentary about markets). All 6 volatility indexes are sending a bullish signal, and some of them are strongly bullish for stock market investors.
Three weeks ago, we noticed the first early bullish signs in our volatility index research. Last week, we saw stronger signals, despite how they were still quite hidden, when we mentioned that growth stocks are more attractive than you might think.
Remember, in terms of leading indicators, as explained in great detail in How To Forecast, the growth stock volatility index started showing a topping pattern several weeks ago. Last week marked “the start of a breakdown of epic proportions,” as we previously reported. And on Friday, July 15, we got a confirmation of this.
The growth stock volatility index confirmed a breakdown, which makes us convinced that growth stocks are about to outperform markets. It also sent a bullish signal to all other markets and indexes.
The S&P 500 volatility index (VIX) is lagging, but it has been trending in the same direction. An 18-month pattern appears to be almost broken now, and this is bullish for stocks.
This VIX breakdown happened on exactly the same day as the US dollar hit 108.9 points, the highs of September 2002, presumably a turning point. It is imperative to always zoom out. Successful investing is about constantly zooming into the details and then zooming out to see the big picture.
Moreover, while our research team is always looking for chart signals and chart structures, we often check the clean version of a chart (without annotations).
When we look at the simplest and cleanest chart of the VIX volatility index on a weekly timeframe, it is clear how this volatility index has been topping. A move of around 20 points appears to be in the making, and we are hoping that the VIX will fall below 20 points to ensure that markets calm down and bring some relief.
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