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VIX-Fear Index At Resistance


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November 04 2016

This week I received an email from a client yesterday, asking me if I can post analysis on VIX (CBOE MARKET VOLATILITY). It's an important market that gives you an idea how much fear is involved during volatile markets, especially when stocks are trading down like for the last few few weeks. Well, what is interesting to me is that this stock market is selling off sharply ahead of an important US elections, but event like this can be a trend changer. In other words, they can cause some reversals since I believe that flows will change. Simply put, investors will adjust their positons which may have an impact on price moves. So if trend will change on stocks, then this will be from bearish to bullish mode.

Those who follows me closely will know that I am tracking final stages of a corrective retracement on S&P500 from August highs. It’s a three-wave decline at the moment, so technically I would be expecting a bounce towards the end of the year. And if I look on daily chart of VIX (CBOE MARKET VOLATILITY), then we can also say that price is in final stages of a current corrective structure, thus it also suggests a turn down, ideally from around 22-25 area. Pattern on VIX tells me that next important leg will be lower which is obviously matching with our count on stocks. Also, lets also not forget to mention an important trendline resistance on VIX, connected from 2016 highs.


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