By Jeff Clark – the editor of the Jeff Clark Trader
The Volatility Index (VIX) is sending yet another warning sign.
It was just two weeks ago we noted how the VIX was approaching its lower Bollinger Band. It was setting the stage for two possible outcomes, both of which were bearish for the broad stock market.
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Today, we’re looking at those two possible outcomes again. Here’s an updated chart of the VIX…
For the fourth time over the past two months, the VIX is testing the support of its lower Bollinger Bands. On the three previous times, the VIX bounced off of support and that bounce coincided with a short-term, modest decline in the broad stock market.
Now… here we go again for the fourth time.
Just as it was two weeks ago, there are two ways to go from here. And, both are bearish.
If the VIX continues to fall, then it will dip below its lower Bollinger Band. That action will set the stage for a broad stock market sell signal when the VIX closes back inside the bands.
On the other hand, if the VIX finds support right here and starts to bounce, then that bounce will likely coincide with another quick decline in the stock market.
Either way, the broad market looks vulnerable to a lower move from here. It’s just a question of how much lower.
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