{"id":21374,"date":"2023-11-15T07:30:56","date_gmt":"2023-11-15T12:30:56","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=21374"},"modified":"2023-11-15T07:30:56","modified_gmt":"2023-11-15T12:30:56","slug":"the-vix-is-reaching-the-danger-zone","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/the-vix-is-reaching-the-danger-zone\/","title":{"rendered":"The VIX is Reaching the Danger Zone"},"content":{"rendered":"

Life’s been great lately for stock market investors.<\/p>\n

Since October 27, all the major stock market averages have moved sharply higher.<\/p>\n

The Dow Jones Industrial Average has rallied nearly 6%. The S&P 500 has gained over 7.6%. And the Nasdaq has been up nearly 11%.<\/p>\n

And while we will get further upside, this mini melt-up has to take a breather first.<\/p>\n

My colleague Brad Hoppmann is one of the best technical analysts I know. He uses a method called predictive analytics to forecast market moves.<\/p>\n

Brad’s recently cautioned readers<\/a> about chasing stocks higher in the short term. My own analysis agrees with him.<\/p>\n

Today we’ll be taking a closer look at the Volatility Index (VIX). The VIX – as you might already know – is the market’s expectation of 30-day volatility.<\/p>\n

Put simply, when the VIX is trading at elevated levels, the market is expecting a lot of volatility.<\/p>\n

On the other hand, when the VIX is trading lower, the market is getting complacent.<\/p>\n

The VIX peaked on October 23. It’s been trending lower ever since. Of course, that makes sense. It’s exactly what we want to see when the markets are rising.<\/p>\n

But right now, the VIX is starting to fall into dangerous territory.<\/p>\n

Take a look…<\/p>\n

<\/p>\n

\"Image\"<\/p>\n

There’s a value range in the VIX from about 11 to 13.50 that has historically resulted in some fierce market selloffs. I refer to this as the “danger zone.” As a point of reference, the VIX is currently trading at around 14.20. Not too far away from the danger zone.<\/p>\n

The last time the VIX fell into this danger zone was on September 14. That coincided with the Nasdaq and the S&P 500 both selling off for over 9%. And the time before that was on July 27. That marked a quick sell-off in the S&P 500 of 5.9% in just 17 days.<\/p>\n

<\/p>\n

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Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n

<\/p>\n

You can see just how consistent this zone has been over the last several years. Nearly every time the VIX has hit the danger zone (red arrows), we saw a spike in volatility and a drop in the market.<\/p>\n

We’re rapidly approaching the zone now. So, it’s time to be cautious with the stock market right now.<\/p>\n

If you’ve gotten into a handful of great trades over the last couple of weeks, then it’s time to consider taking profits. At the very least, using a trailing stop loss is likely a very good idea.<\/p>\n

And if you’ve still got some cash you’re waiting to put to work, it’s better to wait for the next pullback. It’s likely going to be a great buying opportunity for the next run higher.<\/p>\n

Happy trading,<\/p>\n

\"Signature\"<\/p>\n

Imre Gams<\/p>\n

<\/p>\n

\n

READER MAILBAG<\/h2>\n<\/div>\n

Are you taking profits on any positions?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

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