VIX Weekly Chart Falling Wedge Oversold Positive Divergence

VIX, on a weekly basis, shows a falling blue wedge, oversold stochastics, and positive divergence with the RSI, MACD histogram and stochastics. This setup is in agreement with the daily chart that is positviely diverged now wanting to see a VIX bounce. Note, however, the red lines over the last couple months show a weak and bleak profile remaining for the MACD line and ADX. This says price needs to come down for another look at matching or lower numbers after the short term bounce occurs. Remember, up VIX=down equities markets and down VIX=up equities markets.

The chart shows the prior results after the falling wedges formed and also the various instances of negative divergence and postive divergence forecasting the turns each time. The pink lines show the recent sideways symmetrical triangle that resuled in a collapse out the bottom. The small black circles show the little hitches in the 200 MA that corresponded to where the VIX launch occurs.

Projection is for a pop in the VIX, then pull back, then up again to target the 200 week MA at 28-ish at a minimum. The previous fractals, such as the bounce from the April 2010 bottom (a market top) show the bounces occur off the bottom for one week, then typically a pull back the following week, then big up after that, which is a reasonable projection moving forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

Note Added 1/20/12 at 9:13 AM:  The Chinese New Year begins this weekend, and considering that China made a policy move a couple days after the start of last year's new year, next Wednesday, 1/25/12, is a target day for the triple R lowering announcement.

This reserve requirement ease should bounce markets even though a lot of the recent market buoyancy is due to the China easing not yet officially announced.  Simply look at the bullish move in copper that is due to the China easing talk.

Therefore, to gel these tools together, considering this projection for China easing, and the VIX charts above, the projection would be for markets to sell off over the coming days, a bottom will be identified when China announces the triple R easing, markets will bounce perhaps back up to the current index highs again, then likely roll over. The roll over would correspond to the bigger move up in the VIX to test the 200-week MA described above. As always, these forecasts are living organisms that constantly undergo refinement with each passing minute.