After dropping precipitously the stock market's main volatility gauge edged higher on Wednesday.
Since the Vix began pulling back from the 50 range in early March, stocks have followed suit, jumping 30% from their recent lows. Despite Wednesday's increase, many on Wall Street see no reason the broad trend can't continue.
However, Oppenheimer’s chief marke technician Carter Worth isn’t one of them. He tells us, “The Vix is probably not going to trend in such a benign angle” for very much longer.
In other words, Worth expects the Vix to bounce higher signaling stocks are going to drop.
Worth sees some bearish action which he says foreshadows a downturn; “the action in the US dollar, Treasuries appear to be rolling over and utilities are rolling over at an alarming rate."
He goes on to say, "These are not trifling matters. The message is the structure over the last 8-9 weeks is suspect.”
Worth explains that “we’re exactly where we were at the beginning of the year and that’s going to allow people who suffered the sell-off and now enjoyed the recovery to get off the ride, history has shown.”
What’s the trade?
Right now shorting the SPY is a good technique, Worth says.
Of course Worth is a technical analyst and his forecast is based on patterns in the charts. It's worth noting on Fast Money's Halftime Report, trader Joe Terranova made the fundamental argument for stocks to go higher.
He said, it seems to me there’s a real resiliency in stocks. If you’re a money manager you’re not thinking about downside protection – you’re thinking about chasing performance on the upside. Keep in mind there’s trillions sitting on the sidelines and money managers need to put that to work.
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CNBC.com with wires