Market panic imminent? What to look out for upcoming trading week.

Most of the financial news reports I read lately don't paint a pretty picture when it comes to the economy. Jobs, inflation, gas prices etc seem to weigh heavy on the economic recovery. Something I have mentioned a while back, even when the economy was in an 'upswing'. The rapid rise of the Dow in the past few months to me was just an indication that the economy as a whole was overheating. Looking around me in on 'main street' I don't see any sign whatsoever the economy is improving. Guess what. It turns out the economy is in fact stalling. It's the classic 'what goes up must come down' scenario, and in this instance it's bound to go down a lot. I think by the end of the week we'll see the Dow even under 12k.
This is, in my opinion, caused by panic. Investors and traders are likely to pull their money out of the markets next trading week and as a result, this brings clear direction on what I want to invest in. A couple of thing actually. First and foremost, the VIX, the volatility index, a.k.a the panic index has a tendency to rise quickly in turbulent markets.
Let's take a look what the index is trading at right now;

Again, it still amazes me that after all that happened and is going on right now with the economy that this particular index is still trading below 20 points. Anything under 20 points is a bargain to me and given the fact the VIX is now at around 17.95 it is a steal considering the calm before the storm. 

A relevant to the market circumstance commodity I want to address just because it's in the news a lot and I get a lot of questions about lately is oil. OIL (the etf fund) is momentary in my opinion extremely volatile, and I wouldn't touch it with a ten foot pole. No matter how the markets react, either positive or negative, oil seems to do what oil does best lately and that is being unpredictable. Especially now how the middle-east is behaving, there are mixed messages coming from the region which are correlated to oil. Stay away from it is my recommendation.

However, the second index I wanted to mention today is the DIA (and its relative indexes such as the QQQQ and SPY), shorting those indices until the next option expiration is not a bad idea for next week. When markets tumble, these are the spiders that fall immediately after.

As far as the Euro is concerned, this currency is trading at a ridiculous high level at over 1.46. Will it hit 1.50? Last time when it did hit 1.50 it pulled back really quick and all the way to 1.19. Keep an eye on this one for your short position. The FXE is bound to drop drastically when it does.

Take a look at the technical prediction of the FXE next week;

A nice time frame to short this currency for the upcoming week. Even though the MACD is indicating an upswing (although minor) the RSI is heading to overbought territory. A likely scenario is that due to the market volatility (that's why we need to keep the VIX in mind) investors will dump Euro's and pull back in the 'safe haven' zone of the US Dollar.