Another day rocketing higher? Looks that way. I have been backtesting the $VIX warning signals, and I have not found a downside warning that triggers without a subsequent correction in the $SPX (I have tested 1999 thru 2011 thus far). Sometimes, the correction may come weeks later, or sometimes it may be only a decent pullback rather than “correction.” But nonetheless, I am staying on watch for more downside in the days and weeks to come after Friday’s Warning.

Signs that we should reset the clock would be either a new $VIX low (below 12.80) or a new $SPX high (2134). Also, a firm break of the recent SPX high (2116) or a close below the most recent base for the VIX warning (Wednesday’s close of 16.05) I believe would mean relative safety. This is a new indicator and our first time working with it in real-time. So every day is an education.

Monthly expiration is this Friday, and it could be playing a role in this rally. Seeing what happens next week will be interesting.