The spike itself does not give a reason to buy SPX. However, today's closing print of 22.7 does! As the SPX made a solid move off its lower Bollinger Band line on a 15-minute chart around 8:30 AM (not shown), the VIX just crumbled. The VIX closed more than 3 points from its intraday high giving us a buy signal on the SPX.
In similar fashion the VIX Friday closed above the VXV (a longer term measure of the volatility of the SPX). This is a set up for a bullish move in the SPX if the VIX then closes below the VXV, which it did today!
Today's SKEW, however, is far from supportive of this bullish sentiment. The VIX did close down sharply from the crazed levels of Friday, but still printed a stratospheric number at almost 141. This is hardly a place to launch a bullish run from. However, with the FOMC getting out of the way as early as tomorrow, the SKEW could fall dramatically and let the market take off into the Santa Claus rally that everyone expects.
Further, I find the RUT's lack of ability to close in positive territory as somewhat disturbing. The RUT really needs to start moving up if the bulls want us to believe that the lower highs and lower lows of this pullback are over.
