Traders may want to consider buying a put on the DIA. In fact, if you pull up a two-year chart of the Dow, you can see why. For one, RSI, Money Flow, and Williams’ %R are all overbought, and ready to pivot lower, dragging the Dow with them. Two, the Dow is struggling at resistance dating back to early 2022. Failure could send it lower.
And three – and this may sound odd—there’s too much calm in the market, according to the Volatility Index. In fact, at less than 20, the fear-indicating Volatility Index (VIX) is telling us all is calm. But don’t get caught off guard. Anything less than 20 on the VIX is actually a sign of complacency, which can raise the risk of investors getting caught off guard, which can exacerbate fear in the market.
And we all know what happens when the herd gets fearful. If you pull up a two-year chart of the VIX, you can see that every time the fear gauge drops to 20 or below, it pops again shortly after. When that happens, markets get rattled, and every one runs to the exits.