DP WEEKLY WRAP: Short-Term Top Soon?March 15, 2019
At the end of last week I was looking forward to some more selling to extend the decline that had started from the March 4 top. But no. Price rebounded off last Friday’s low, eventually setting a new high for the rally off the December lows. However, on Friday we got a signal that has me looking for a short-term market top very soon. The signal comes from the VIX panel on the chart below. You’ll note that I use a different presentation of the VIX than what you will normally see. First I use a log scale to enhance the definition in the lower ranges, and I reverse the scale so that it provides an intuitive overbought/oversold display. Finally, I add Bollinger Bands so as to apply dynamic limits to the overbought/oversold range. When the VIX hits the top Bollinger Band, which happened today, it is a signal to look for a price top within a few days. As you can see from prior instances on the chart, this signal works pretty well, but, of course, no guarantees. Note: The high volume today is due to end-of-quarter options expiration and should not be interpreted as a blowoff or any other climactic internal event.
Source of this (above) article: http://blogs.stockcharts.com/articles/decisionpoint/2019/03/dp-weekly-wrap-short-term-top-soon.html