Gonçalo Moreira, CMT
Independent Analyst
A relative strength study between the S&P 500 and the VIX shows how the ratio between both instruments is warning we could go from a fearless crash into a fearful crash in the equity indices.
With an intense pace of advance since February 11th, the ratio recaptured the October 2015 highs sending the message to get out of shorts in equities and wait for a better time to do so.
But at recent lofty levels, the VIX component is contributing to a rather toppy technical landscape in the ratio, spelling trouble for stocks. In the event that there is a decline greater than the April set-back, we would have to re-evaluate any bullish labeling, for the anxiety represented by the VIX would be rising while equities plummet.
The peaks in the MACD are going from mountains to molehills, an early signal of dissipation of upside momentum.
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