Wednesday, June 11, 2008

Setting Up For Another Leg Down

Over the past few months, the markets have fought all that is logical in order to move higher. After bottoming in February, the Dow Jones rocketed 1,200 points. But did last Friday's sell-off signal a bigger sell-off looming?

To find out, let's take a look at the CBOE Volatility Index ($VIX). This index measures the implied volatility of S&P 500 index options. When the VIX moves higher, it signals more volatility. And more volatility generally means lower stock prices. With that said, when you see the VIX moving higher there is a strong likelihood that stock prices will move lower.

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