VIX Volatility 30-Minute Chart Bottoming Action

Keystone has liked volatilty from the long side and looked like Einstein as the month began, but now looks like a dunce as the ever complacent traders became moreso over the last week.  The long side for volatilty remains attractive and the current action in VIX hints at bottoming behavior. Starting on the left-hand side, the green falling wedge, oversold conditions and positive divergence bounced the VIX which was a precursor to the large Tuesday selloff.  The peak occurred in the VIX last Tuesday as the markets printed lows, as would be expected since they move inverse to each other.

Each candle on this chart represents 15 minutes of trading time.  Note the gap up and gap down moves that are routine at each open.  At the peak last Tuesday note that the RSI and MACD histogram negative divergence caused the smack down but the other indicators such as MACD line, stochastics and money flow will be happier if they see a higher high than 21 print in the future.

In real time, now, which is represented by the last candle on the right-hand side, the VIX is working lower. Note the purple lines which shows how the VIX moves during the day. You can see the momo being reversed over the last few days as volatilty drops to the current prints.  The red circle for the RSI says it wants to see a matching low once more, the other indicators are positively diverged and want to see the VIX continue to move upwards now.

Projection is for VIX to move up at any time, a possible matching low is on the table for today at 15.5-ish but that should simply lock in the launch for the upside with positive divergence on the RSI.  Keystone is in VXX and entered TVIX at these prints now at 14.40 or lower. These are highly dangerous crack ho ETF's and especially wild since they try to represent volatilty.  Note that the movements of these ETF's and the VIX may actually be opposite ($VIX, VXX and TVIX should all move in the same direction) since the ETF's do not represent the VIX movement all that well all the time. Sometimes the correlation is so poor it is comical, unless you are losing money of course.  Hence, the ride is wild and unruly on the volatility bronco.  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.

Note Added 3/12/12 at 6:08 PM:  Volatilty, the VIX, moved lower to finish the day, coming back down to test the lower area at 15.64. As mentioned above, this behavior does a lot to satisfy the lone holdout indicator, RSI, that wanted price to come back down. Tomorrow VIX may explore 15.2-15.6 and set up a move higher from there, or simply move higher from the open. A failure of 15.2 would then target 14.8 as the bounce point.  VXX closed at 22.27.  TVIX closed at the LOD at 14.03. All volatilty charts remain attractive with positive divergence in place forecasting upside ahead (up volatility = down markets).