BULLISH PERCENT INDEXES TURN UP FOR ALL MAJOR MARKET INDEXES -- A VIX DROP BELOW 200-DAY AVERAGE COULD BOOST MARKET

VIX THREATENS ITS 200-DAY MOVING AVERAGE... I've gotten a lot of requests to take a look at the CBOE Volatility (VIX) Index. This is a good time to do so because the VIX is at a critical juncture. Just to review, the VIX generally trends in the opposite direction of the stock market. Each upward spike (starting with last July) has coincided with a market drop. Each peak (over 35) has coincided with an interim bottom (the last one in mid-March). A number of readers have pointed out the pattern of rising bottoms in the VIX since last October. Over the long run, that's potentially bearish for the stock market -- but only if that pattern continues. Which brings us to the present moment. Chart 1 shows the VIX testing its 200-day moving average for the fourth time in the last six months (and an up trendline drawn under those lows). What it does from here could have important implications for the market. A close below its late-February intra-day low at 21.64 would interrupt the pattern of rising bottoms and would give a boost to the market. What leans me toward thinking that might happen is that the 12-day Rate of Change (ROC) line (below chart) has already broken its February low.

Chart 1

NYSE BULLISH PERCENT TURNS UP ... On March 27, I wrote about the short-term improvement in the NYSE Bullish Percent Index. [The BPNYA is the percent of NYSE stocks that are in point & figure uptrends]. Chart 2 compares the BPNYA to the NYSE Composite Index (green line) since last October. Both had been falling together until March. At that point, the Bullish Percent Index formed a higher low which formed a positive divergence from the NYSE Index which hit a new low (on a closing basis). I wrote, however, that the BPNYA needed to clear its late-February peak near 43 to turn its trend upward. It has now done that. That suggests that the current market rebound is more than a short-term bounce and puts us into the category of a rally of at least "intermediate" proportions. [A rally that can last as long as three months from its March bottom and retrace half of the prior downtrend]. Chart 4 shows this week's upside breakout on the point & figure chart for the BPNYA. All of Bullish Percent Indexes for the major market indexes are now in p&f uptrends, including the Nasdaq Composite (BPCOMPQ) in Chart 4.

Chart 2

Chart 3

Chart 4