EB Daily Market Report - Quick Update - Thursday, January 5, 2023

Just a quick heads up. First, I will be very busy gearing up for MarketVision 2023 tomorrow, so you'll likely get a quick market update from John Hopkins.

Next, we rarely see the S&P 500 and Volatility Index ($VIX) trending in the same direction. Typically, the S&P 500 rises and the VIX falls. Or the S&P 500 falls and elevated fear sends the VIX higher. When the daily correlation coefficient turns positive, it means that these two are trending in similar directions and that USUALLY means we should be watching for a direction change in the S&P 500. Because it's been trending lower, I believe we could see a sudden move higher in the S&P 500. These signals are certainly not a guarantee and do not work 100% of the time. But they're a solid-enough indicator to share this with you. Check out this 3-year chart to review prior instances and how they resolved:

The reversal, if it occurs, doesn't always happen immediately, but I'd be very careful on the short side. Personally, I've taken on a bit more risk with leveraged ETFs.

Happy trading!

Tom