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Yesterday the price of oil gapped up over $100 and the VIX opened the day over $30. I want to show you something I noticed that isn’t in this morning’s headlines.

The DOW tumbled on the open, but what I want to point out to you that, while it was red in the morning, the VIX “fear index” traded down too.

What this means is that right after the open people were not scared, but were putting back on more risk - they were using the gap down as a buying opportunity and not in panic at all.

If you look at a daily chart of the Nasdaq you can see that it hit its 200-day moving average yesterday and bounced off of it.

If we forget the news and just look at the charts we can see that the Nasdaq hit this key support level and that brought buyers in to buy a bounce.

The problem is when I see the market go down in the morning and the VIX go down off the open, with a weak bounce, that is typically how the market trades during corrections or declines that really aren’t over.

They end in panic washouts and that is not what a panic washout looks like.

-Mike

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