VIX Daily Chart Seasonality Pattern Falling Wedge Oversold Positive Divergence

Note the seasonality that typically occurs as one year ends and the new year begins.  Volatilty tracks lower into the start of the new year where a spike upward then occurs. In 2010 it occurred in January, in 2011, a big bounce occurred in both January and February. The VIX is currently showing the down part of the blue line but the unknown is when the up part of the blue line will occur.

The patterns also display falling wedges, shown in red, which are bullish as they point to a bottom. The stochastics are now overbot which is bullish.  All the indicators across the board are positively diverged indicating that the VIX is on the launch pad and all fueled up for the rocket ride but when will the fuse be lit? These indications say now, so hold on tight and buckle up.

Although this daily chart is positively diverged the weekly chart is not, the indicators display instead a weak and bleak profile.  This hints that a spike will occur now, off the positive divergence launch pad, then back down again due to the weekly chart.  The pattern could very well work out like last year with a jump, pull back, then larger jump upwards.  The VIX moves opposite the broad markets so this would mean a sell off in the markets now, then a recovery move again, where markets come back up to current prices, then roll over.  If this scenario plays out, the temporary bottom in the markets (top for the intial VIX spike that should now occur), may occur when China announces the triple R ease which is market bullish.

But, to keep things simple for now, the projection is that the seasonality, and the falling wedge, the oversold conditions, and the positive divergence, all point to a spike in the VIX at any time which will correspond to the broad markets selling off. The spike will require nimbleness, however, since the VIX should return down to these levels quickly thereafter due to the weakness on the VIX weekly chart.  This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.