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Tuesday, July 10, 2012

Should SPY Fall Below 133 Level, Expect VIX To Jump 23 level.

 SPY closed at 134.14 on July 10, 2012, right at its 20-day moving average.  VIX closed at 18.72.  Remember the chart of VIX median values from the previous post.  When SPY is in an uptrend and above its major moving averages, the median value or 50/50 probability line of VIX is around 18%.  The median value of VIX jumps to 22%-23.5% when SPY trades below its 20-day & 50-day moving averages.

FVE has stopped declining and has begun to rise again and currently stands at 20.89 compared to VIX of 18.72.  As long as SPY remains above 133 level, I believe investors would still believe that the current rebound would continue (hence VIX to remain below 20 level).  Should 133 support level fail to hold, I would expect SPY to test its 200-day moving average again and expect VIX to climb to 23 level.

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