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Two Signals: Breadth and Volatility

By Lawrence G. McMillan

Breadth was terrible yesterday, making Wednesday a true 90% down day in terms of “stocks only” data and a 90% down volume day in NYSE terms. This is the first true 90% down day since March 10th. That usually means that one can expect a reflex rally in the next day or two, but also indicates that lower prices eventually lie ahead.

Volatility indices ($VIX) skyrocketed yesterday, with $VIX rising back above 18 again. Watch for $VIX to rise above 19 (or 20) and then reverse sharply back down. That has been a good buy signal for the last couple of months. Conversely, if $VIX rises and holds onto most of its gains, that would be negative. 

This information was excerpted from the Market Commentary in this morning's Daily Volume Alerts newsletter.

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