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Stock Market Report

VIX Sell Signal Appears For A Third Time This Year

by Oliver Silverstein

September 9, 2010

In January of this year, I alerted you to the fact that the VIX had issued a sell signal on the overall market.

 

It was a valid signal, and the market declined about 8% after the signal appeared.

 

Then in April of this year, I again alerted you to the fact that a second VIX sell signal had appeared, warning of a coming market decline. My exact words were, "The second appearance of the VIX sell signal this year is flashing bright red warning signs that a decline is about to happen."

 

It was also a valid signal, and the market declined about 17% after the signal appeared.

 

Well, as of this week, a VIX sell signal has appeared for the third time this year. Like the previous two appearances this year, I fully anticipate this signal to be valid and for the market to begin its decline within a week.

 

As I said before, there is not a direct correlation between a VIX sell signal and a market decline the following day.

 

It can take as much as two weeks before we see the market decline develop as a result of the VIX sell signal.

 

In January, the market topped 7 trading days after the VIX sell signal. In April, the market topped 10 trading days after the VIX sell signal.

 

Unlike the previous two appearances of the VIX sell signal this year, the third appearance is also accompanied by a cluster of Hindenburg Omens. This does not bode well for the market.

 

I am expecting a top in the market next week, somewhere between September 13th and 17th. After that top, I am looking for the great stock market crash of 2010 to begin.

 

From early 2008 onward, I talked for over a year about the decline. From mid March 2009 onward, I talked for over a year about the rally.

 

Then, In early May of this year, I told you that the one year rally in the stock market is now over. We haven't even come close to regaining the those highs. The trend is clearly down, and is about to accelerate much lower.

 

This is the final "Uh-Oh" moment before things turn very, very ugly in the stock market. You had better prepare for a cataclysmic financial storm.

 
 

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