Since equity markets recovered from the most oversold condition since the March 2009 low, the VIX has relapsed it's way down to 200-day MA support. The latest rebound in the Volatility Index suggests that equity markets may continue to trade rangebound. Moreover, the DJIA (Dow Jones Industrial Average) has paused at a key Fibonacci retracement (78.6% of the June 21st/July 1st decline) and equity futures are demonstrating bearish MACD divergence on their 4-hourly charts. If, however, the VIX manages to substantially break down below the 200-day MA and the June low at 22.87, then its entirely possible that equity markets could extend back towards the 2010 highs set back in April. This would suggest further weakness in the US Dollar and could induce the EUR/USD to complete the Head & Shoulder's measured move above the 1.30 threshold. In the meantime, expect a large sideways move to continue for stocks.
