Why I’m Watching The VIX Today

April 15, 2003
Don Miller

Both major markets remain in
hourly uptrends as we head to press, albeit ticking down from their late morning
highs.Â Early pullbacks to Monday’s
closing 13-minute trend held, subsequent to the pre-market fade off Globex highs
as the 13 continues to be a strong trade guide, as was the case yesterday.

Resolution of the current midday test of the 13-minute uptrend — which we can
consider to be pullback number four or five from the trend’s inception,
depending on how you count them — should provide clues into the afternoon
trade, along with the 13-minute VIX.X (shown below) which has been in inverse
lockstep with ES.Â A turn to the north of the VIX.X 13, along with a break of its
ES counterpart, may set the stages for afternoon shorts with stops set on any
reversals.

In the meantime, trusting the current trends until broken remains the prudent
course of action, as opposed to those blindly shorting the market simply because
price “seems” too high or the
(
$VIX.X |
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PowerRating) “seems” too low.Â Until trends
turn, such absolute levels remain completely meaningless to me.