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Yesterday’s Rally Quickly Forgotten

By Lawrence G. McMillan

Yesterday’s rally has quickly been forgotten, as the market has cascaded downward today in a series of three large drops.  This is further evidence of the fact that the primary trend is down. In fact, considering the hype behind yesterday’s oversold rally, it is actually an even more negative sign that it was obliterated so quickly.  The chart of $SPX is in a downtrend, and that is the most important thing.   $SPX is once again nearly 3 standard deviations below its 20-day moving average (an oversold condition).

There has been a lot of talk about volatility, and VIX in particular, on TV and in the media.  Our position has been that the relatively low level of $VIX that has accompanied this market decline so far is a sign of complacency – not any sign of positive divergence.  Now, $VIX is accelerating upward at a faster rate, trading above 20 and then 21 for the first time since mid-March.  This will be the third time in the last four days that $VIX made a new relative closing high...

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