The VIX Watch

We've been tracking the VIX lately as a solid measure of the current psychology of the market.  Last week, it gapped down below its support level around 40, signaling that investors are now less concerned about the market falling out from under them and that investors are more willing to hold onto their shares instead of selling in a panic.  Our prediction is that as a result of their renewed confidence, investors will be buying on dips and holding on.

Today, the VIX remained below its previous support level, but moved back towards its moving averages.  Tomorrow's VIX reading will be key in determining where the market will be  headed over the short run.  If it continues to trend down, then we can expect the rally to continue.  If it breaks back above its previous resistance level, then things will be uncertain from there.