VIX and More...Short Term Negative

The setup discussed on Thursday arguing for a higher close in the short term was fulfilled successfully on Friday. In that blog entry, i also pointed to a previous gap-up related study that argued for a lower close in the short term should be close up Friday. Given that we did close up Friday, i'd like to present that study once more.
On Thursday, the S&P painted a gap and run candle (Thursday's low was higher than the previous day's high). This was followed Friday by yet another higher close. Surprisingly, since 1990, there have only been 11 similar occurrences. In 10 out of 11 cases, the market was trading lower within 3 days.

(Note: column '3Day+' displays the number of days it took the S&P to close higher within the next 3 days. a value of 0 indicates the market did not close lower within 3 days)

Ticker	Date/Time	Close	3Day-	%Chg N1	%Chg N2	%Chg N3
SP500	10/2/1990	315.21	1.00	-1.21	-0.80	-1.18
SP500	6/15/1992	410.29	1.00	-0.48	-1.96	-2.27
SP500	10/18/1996	710.82	1.00	-0.14	-0.60	-0.50
SP500	9/27/2007	1,531.38	1.00	-0.30	1.02	1.00
SP500	11/29/2007	1,469.72	3.00	0.78	0.18	-0.47
SP500	12/24/2007	1,496.45	2.00	0.08	-1.35	-1.20
SP500	4/3/2009	842.50	1.00	-0.83	-3.20	-2.06
SP500	4/13/2009	858.73	1.00	-2.01	-0.78	0.77
SP500	6/2/2009	944.74	1.00	-1.37	-0.24	-0.49
SP500	7/16/2009	940.74	1.00	-0.04	1.10	1.47
SP500	9/9/2009	1,033.37	0.00	1.04	0.91	1.55
SP500	10/9/2009	1,071.49	0.00	0.00	0.00	0.00

Over the past 5 days, we have seen the VXO (the 'old' VIX) decline over 20% (on a closing basis). This presents another high probability short setup. There have been 61 similar occurrences over the past decade where the VXO has retraced more than 20% in one week. In 52 cases (or 85.25% of the time) , the S&P 500 was trading lower within 3 days.

Ticker	Date/Time	Close	3Day-	%Chg N1	%Chg N2	%Chg N3
SP500	6/21/1999	1,349.00	1.00	-0.97	-1.18	-2.46
SP500	6/22/1999	1,335.88	1.00	-0.21	-1.50	-1.54
SP500	8/17/1999	1,344.16	1.00	-0.84	-1.53	-0.56
SP500	10/22/1999	1,301.65	1.00	-0.62	-1.52	-0.38
SP500	2/4/2000	1,424.37	1.00	-0.01	1.22	-0.89
SP500	3/3/2000	1,409.17	1.00	-1.27	-3.80	-3.01
SP500	4/24/2000	1,429.86	0.00	3.33	2.18	2.45
SP500	9/27/2001	1,018.61	0.00	2.19	1.96	3.21
SP500	9/28/2001	1,040.94	1.00	-0.23	1.00	3.01
SP500	2/13/2002	1,118.51	1.00	-0.18	-1.28	-3.14
SP500	7/29/2002	898.96	3.00	0.42	1.41	-1.59
SP500	7/30/2002	902.78	2.00	0.98	-2.01	-4.27
SP500	7/31/2002	911.62	1.00	-2.96	-5.20	-8.45
SP500	8/19/2002	950.70	1.00	-1.40	-0.14	1.26
SP500	11/20/2002	914.15	0.00	2.15	1.79	2.05
SP500	3/29/2004	1,122.47	0.00	0.40	0.33	0.86
SP500	3/30/2004	1,127.00	1.00	-0.07	0.46	1.31
SP500	5/19/2005	1,191.08	1.00	-0.15	0.23	0.25
SP500	5/20/2005	1,189.28	0.00	0.39	0.40	0.06
SP500	5/23/2005	1,193.86	2.00	0.02	-0.32	0.31
SP500	11/3/2005	1,219.94	3.00	0.02	0.24	-0.11
SP500	6/20/2006	1,240.12	0.00	0.97	0.44	0.35
SP500	6/21/2006	1,252.20	1.00	-0.53	-0.61	-0.13
SP500	7/25/2006	1,268.88	1.00	-0.04	-0.45	0.76
SP500	8/18/2006	1,302.30	1.00	-0.37	-0.27	-0.71
SP500	3/9/2007	1,402.84	2.00	0.27	-1.77	-1.12
SP500	3/12/2007	1,406.60	1.00	-2.04	-1.38	-1.02
SP500	3/20/2007	1,410.94	0.00	1.71	1.67	1.78
SP500	3/21/2007	1,435.04	1.00	-0.03	0.07	0.17
SP500	3/23/2007	1,436.11	2.00	0.10	-0.52	-1.31
SP500	6/19/2007	1,533.70	1.00	-1.36	-0.75	-2.03
SP500	7/3/2007	1,524.87	0.00	0.03	0.37	0.46
SP500	8/22/2007	1,464.07	1.00	-0.11	1.05	0.19
SP500	8/23/2007	1,462.50	3.00	1.15	0.29	-2.06
SP500	8/24/2007	1,479.37	1.00	-0.85	-3.18	-1.06
SP500	9/19/2007	1,529.03	1.00	-0.67	-0.21	-0.74
SP500	9/21/2007	1,525.75	1.00	-0.53	-0.56	-0.02
SP500	9/24/2007	1,517.73	1.00	-0.03	0.51	0.90
SP500	12/21/2007	1,484.46	3.00	0.81	0.89	-0.55
SP500	12/24/2007	1,496.45	2.00	0.08	-1.35	-1.20
SP500	12/26/2007	1,497.66	1.00	-1.43	-1.28	-1.96
SP500	2/1/2008	1,395.42	1.00	-1.05	-4.21	-4.94
SP500	3/24/2008	1,349.88	2.00	0.23	-0.65	-1.79
SP500	3/25/2008	1,352.99	1.00	-0.88	-2.01	-2.79
SP500	4/18/2008	1,390.33	1.00	-0.16	-1.04	-0.75
SP500	5/19/2008	1,426.63	1.00	-0.93	-2.52	-2.26
SP500	7/21/2008	1,260.00	3.00	1.35	1.76	-0.59
SP500	7/22/2008	1,277.00	2.00	0.41	-1.92	-1.51
SP500	10/31/2008	968.75	1.00	-0.25	3.82	-1.65
SP500	11/3/2008	966.30	2.00	4.08	-1.40	-6.36
SP500	11/4/2008	1,005.75	1.00	-5.27	-10.03	-7.43
SP500	11/5/2008	952.77	1.00	-5.03	-2.29	-3.52
SP500	11/26/2008	887.68	2.00	0.96	-8.05	-4.38
SP500	11/28/2008	896.24	1.00	-8.93	-5.29	-2.85
SP500	12/19/2008	887.88	1.00	-1.83	-2.78	-2.22
SP500	12/22/2008	871.63	1.00	-0.97	-0.40	0.13
SP500	1/27/2009	845.71	2.00	3.36	-0.07	-2.34
SP500	3/12/2009	750.74	0.00	0.77	0.42	3.65
SP500	6/29/2009	927.23	1.00	-0.85	-0.42	-3.32
SP500	9/10/2009	1,044.14	1.00	-0.14	0.50	0.81
SP500	10/9/2009	1,071.49	0.00	0.00	0.00	0.00

Lastly, over the past week, the VIX has moved from trading well above it's 10MA to now trading below it's 10MA by 10 percent or more. There have been 124 cases in the past decade where th VIX has closed below it's 10MA by 10% or more. In 102 cases (or 82%), the S&P 500 was trading lower within 3 days.

These studies argue for a close lower than 1071 by Wednesday.