Over the past summer, I p
osted a note on a model that I follow closely - ratio of the Nasdaq 100 to the
VIX. I smooth both to get rid of the noise and come up with a picture of stocks versus volatility. If the the short average (Red) is leading the long average (blue) we have
bull market conditions. If you tie in the Oscillator below, you can confirm if the conditions are short term extreme to the upside or downside. The
flash crash warning from this chart occurred in early April as the VIX made a dash against stocks - only to be repealed last this summer. ON balance this model still argues for upside in stocks and is in fact turning upward now. This has me a buyer of stocks and a seller of volatility.
If you tie this model in with the
PF model,
the Trender, the
Renko chart and the
PMomentum model, all four argue that the pricing action for the equity markets is higher. Thus I remain of the stance that we are still in a bull market and higher prices will be in store going forward and not an outright collapse. Collapses normally have warnings -
Jeff Cooper over at
minyanville.com wrote once that markets always give us a chance to get out before the bear market arrives. Thus I don't see enough to ague that the upward trend is over.
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