If the Volatility Index (VIX) versus S&P 500 (SPX) pattern analysis has any merit, then this morning it should be indicating that the spike to new lows in the SPX is eliciting increasing levels of fear, represented by a spike to new highs in the VIX. This is NOT the case so far today.

Let's notice that although the SPX did plunge to a new reaction low and looks (also feels) like an equity crash scenario is in motion, the VIX has climbed to a lower high than last Friday's recent peak at 48.11 and actually has turned down during the first hour of trading.

Technically, the action in the VIX is not confirming the weakness in the SPX, which is another warning signal that on a near-term basis the selling pressure might be very close to exhaustion. That said, let's realize that the key timeframe will be the final hour of trading, which lately attracted selling pressure and/or the establishment of new short positions in equities to reduce or otherwise hedge overnight (European) exposure. Today's final hour will be very telling as well.

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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