Why the VIX May Not Be Best Market Indicator Right Now

The following headline appeared this morning:

"Why the VIX May Not Be Best Market Indicator Right Now"

The article made the following comments:
1. The CBOE Volatility Index is often used to predict where markets are headed in coming weeks, but now may not be a good time to rely on Wall Street's so-called fear gauge for direction.
2. The open interest put-to-call ratio and average implied volatility gap between puts and calls on the VIX are showing opposing views.
3. These two numbers are usually in agreement but they are completely the opposite now, which is very unusual to see.

So ... how on earth can that "unusual, opposite relationship" mean that the VIX "May Not Be the Best Market Indicator Right Now"???

Why would anyone want you to ignore the VIX and accept that it may suddenly be meaningless?

Below is a 60 minute VIX chart that goes back to June of this year. I do NOT see anything unusual, other than the fact that the VIX has been in a trading range since July.

What is significant, is that the VIX closed at the bottom of its trading range last Friday, while our Oscillator was in overbought territory, and the RSI was sitting on a June/September support line.

* A normal move now would be for the VIX to move higher this morning and engage in a bounce off the current trading range's support.

So in our analysis, the short term VIX view is acting as a good indicator right now.

The confusion for other analyst may be coming from an opposite, longer term VIX possibility.

On a longer term chart (2+ year chart), the VIX has three possible downside support possibilities. It is entirely possible that the VIX could reverse and break the short term support line in the coming days and then move down to 19.83. (The VIX was at 21.31 on Friday's close.)

* 19.83 is the first caution point to watch if you are a VIX watcher. That is an older "double bottom" resistance area, and a "current double support line intersection".

If the VIX were to fall below 19.83, then 17.53 and 16.71 would be the next two resistance areas and both of these are where "gaps" would be closed. If reached, these resistance points are a places where you should tread very cautiously as the markets would be very vulnerable at these points. The odds for moving lower than these levels are very low.

So ... for now, on a shorter term basis, the VIX should bounce of its support and move higher.

From:http://www.stocktiming.com/Tuesday-DailyMarketUpdate.htm