EBB Index Overview:
The EBB index is a proprietary measure of the momentum of implied volatility relative to the momentum of the market. Extremes and divergences are important tests of market direction. Anything above 5 is a measure of extreme upside momentum of sentiment. Such moments are not necessarily trend killers, but likely times when the market needs a breather. Negative divergences at highs (see red trend lines) are markers for a change in market direction. A lack of divergence at highs suggests the uptrend can continue (see green trend line.) With the recent action in the chart above, the EBB has moved to a higher reaction high, suggesting the market has yet to reach its high for that current period.