The tell-tale VIX

Last night's post was titled "Looking grim" and today the Dow plunged 131 points - in the first minute of trading - grim enough for you?  The Dow sliced through its 12,450 support level and kept on going  Things are really looking bad now - or are they?

Let's start with the indicators. The Dow has now fallen into definitively oversold territory, with the RSI and momentum at or below levels from which rallies have started in the past.  And the stochastic is getting ready to execute a bullish crossover.

Next, we have the price of oil.  As I mentioned, oil is now in a positive correlation wit the market.  Today, oil was down, market was down.  Well in this evening's trade, oil is up - a bullish sign for stocks.

And then we come to the futures.  Whereas last night all three of the ES, NQ, and YM were down down down, tonight they're all up, by 0.21%, 0.15%, and 0.2% respectively.  While not major gains, it's significant that at least they're not continuing to drop in the overnight (at 1:40 AM EDT).  And the trend has been steadily upward since around 7:30 PM this evening.

Next we look at the dollar index.  I don't get the DXY anymore since the NYFE decided to hide it behind a paywall, so I use the $USDUPX, the Deutsche Bank US Dollar Index, which is still free, instead.  And this index put in 2/3 of a bearish abandoned baby pattern today with a hugely gapped up doji.  If the DUPX is lower tomorrow, watch for the dollar to decline still further.  And since the dollar and the market are in an inverse correlation these days, that will be bullish for stocks.

And last but most definitely not least, we have the VIX, which for once is giving some real guidance, in the form of a big gap up today that took it not just to its upper Bollinger band, but above, opening at 20.03.  The VIX was all downhill after that, putting in a tall red candle.  That kind of action almost always signals a lower VIX the next day and if not then, then one day later.  A lower VIX implies higher stocks.

So all in all, I'd say we're in for some higher stock prices, if not tomorrow, then definitely on Wednesday.  I'd say there's a fair chance of higher tomorrow and an even better one on Wednesday.  We'll see.