Dow warns of reversal but VIX refutes

By Colin Twiggs
September 23rd, 2013 3:00 am EDT (5:00 pm AET)

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Dow Jones Industrial Average tall shadow (or wick) on last week's candle warns of short-term selling pressure — echoing the long-term bearish divergence on 13-week Twiggs Money Flow. Reversal below 14800 would confirm a primary down-trend. Breakout above 15660 is unlikely, but would signal a fresh advance.

Dow Jones Industrial Average

However, VIX below 15 continues to suggest a bull market.

VIX Index

I have more faith in the calculation of the S&P 500 index — which displays a milder bearish divergence. While reversal below 1630 would signal a reversal, it would not penetrate the long-term rising trendline; only breach of 1530 would be cause for serious alarm. Respect of support at 1630, on the other hand, would be bullish, suggesting an advance to 1850.

S&P 500

* Target calculation: 1700 + ( 1700 - 1550 ) = 1850

Risk no more that you can afford to lose, and also risk enough so that a win is meaningful.

~ Ed Seykota