Market Outlook: Lesser-Known Volatility Index Points to More Downside

Stock prices fell after Google (NASDAQ: GOOG) disappointed investors. That news may prove to be the exact moment when a market decline began. Time will tell whether this is simply a dip in an uptrend that should be bought, the start of an overdue market correction, or the beginning of a bear market. For now, I'm looking for at least a correction.

Earnings Weaker Across the Board
Google was only one of the market leaders that failed to meet the expectations of analysts. Among the other companies to miss revenue or earnings forecasts were Microsoft (NASDAQ: MSFT), General Electric (NYSE: GE), Chipotle Mexican Grill (NYSE: CMG) and McDonald's (NYSE: MCD). S&P reports that 115 of the companies in the S&P 500 index have reported earnings for the third quarter and 30% have missed estimates. This is up slightly from the second quarter when only 25% of companies missed estimates.

All of the news hitting the markets led to a volatile week that ended about where it started for traders owning SPDR S&P 500 (NYSE: SPY), which closed up 0.35%. PowerShares QQQ (NASDAQ: QQQ), an ETF that tracks the 100 largest Nasdaq stocks, fell 1.49% for the week, but dropped 3.49% in the day and a half after the news on GOOG broke.

Despite the relatively large sell-off late in the week, there is no sign of panic in the market, at least when looking at the CBOE Volatility Index (VIX). The fear index is still trading near a relatively low level. Price bottoms usually aren't seen until VIX rises.  (more)