Art Cashin Warns on the VIX

Brian Hicks

Updated January 13, 2010




Here’s the latest look at the markets from CNBC’s Art Cashin.

As usual Art covers it all including a developing technical sign from the VIX which he thinks may spell trouble

Roll the tape….




As for that VIX sell signal Art referred to in his comments, here’s the skinny on the technicals that has everyone watching the fear gauge today.

From the Wall Street Journal by Paul Vigna entitled: The (Inevitable) Correction

“Now, everybody’s been making hay out of the VIX, the so-called “fear gauge” that measure options volatility. It’s been down so far every day this year, to levels not seen since April 2008 (when it was, incidentally, on its way up, not down.) But it’s also brought the VIX to near a rare technical sell signal, according to Robert McHugh of Main Line Investors (which comes to us via UBS’ Art Cashin.)

The VIX, he notes, fell through “its bottom-boundary two-standard-deviations Bollinger Band Monday.” He notes other sell signals were triggered in September 2007, February 2008 and May 2008, and each one led to a big selloff. Yesterday, the VIX closed at 17.55, with the Bollinger Band at 17.70. What you’d have to see next is a move back above that lower band, and with the VIX up 4% this morning at 18.29, that’s happened,

“Are sell signals in the VIX reliable and significant? Oh, yes they are. Sell signals from the daily VIX are rare.”

For more on this, the Evil Speculator lays out the ground rules of this sell signal, and adds “the sell signals are far more accurate than the buy signals” and if the signal is actually coming, it’ll come in the next two days.”

Food for thought….

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