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Thursday, April 11, 2013
VIX Volatility 2-Hour Chart
Volatility plays an important role in market direction these days. The 12.30 support was violated today but the bears were not giving up without a fight and pushed the VIX above 12.30 for much of the day, in fact, all the way into the closing bell at 12.44 until the drop in the final minute to the 12.24 closing print. The price behavior is a falling wedge and the indicators are positively diverged, sans the MACD line, along with oversold stochastics, so the bears have a slight edge since this set-up hints at a bounce on tap. However, the JPM and WFC bank earnings tomorrow morning, and Retail Sales, are going to dictate the action. Very simply, a sustainable drop under 12.24 and move down to 12 and perhaps lower guarantees the SPX over 1600. The bears will obviously fight to move the VIX higher from 12.24 to create broad market selling. The broad indexes will sell off strongly once VIX 14.40 is achieved but this remains two points higher. 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 4/13/13 at 7:00 AM: The fight continues. VIX jumped to 13 at the opening bell yesterday in concert with the broad indexes selling off, however, the central banker money floods into the market during the morning and markets recover for the remainder of the day. The VIX drops in the final minutes to print 12.06 exploring the gap from March. The SPX was down, and the VIX was down. This does not occur often, less than 10% of the time, since they are inversely correlated. One of them is wrong. Either the SPX should have finished positively on the day printing new highs, or, the VIX should be substantially higher. Next week will likely provide the answer.
KS - It would definitely be against the last 3 years worth of precedence for the VIX to drop sustainably lower from here. See my chart that I've drawn up showing bottoms in the VIX usually occur at this time of the year, and rise as earnings season picks up steam:
Yep, you are correct, but as Mark Twain, the witty author always quipped, 'history does not repeat but it often ryhmes'. In trading, lots of curve balls are always thrown, so the VIX should pop higher in the near future well up over 20 and higher, maybe 30, maybe 40 in a huge sell off as the CPC put/call ratio projects, however, the path there may begin with a lower print first. Your chart is excellent but as mentioned previously, it is not a function of earnings seasonality, it is more a function of the central banker policies running out of gas; QE1 in spring 2010, QE2 ran out of gas in spring 2011, Operation Twist and ECB's LTRO 1 and 2 ran out of gas in spring 2012. That prompted Draghi to pledge supporting the euro by 'whatever it takes'. The anouncement of ECB's OMT program, now ongoing, and the Fed coming out saying that they will provide QE3 Infinity created the summer rally into the September 2012 market top, then the Fed added more juice in December 2012 replacing Operation Twist with the QE4 Infinity and Beyond program, ongoing now, that is performing the 85 billion per month purchases. This is where we are at now. These are likely losing oomph but the big thrust over the last couple months that was unforeseen was the BOJ easing, the weakening yen, that directly catapulted the SPX the last 50 to 80 handles. So, it is really a function of the yen and BOJ to see if the projection on your chart is correct. It should be although it may take more days or weeks to play out. The put/call says a major selling event should begin at anytime.
KS - It would definitely be against the last 3 years worth of precedence for the VIX to drop sustainably lower from here. See my chart that I've drawn up showing bottoms in the VIX usually occur at this time of the year, and rise as earnings season picks up steam:
ReplyDeletehttp://3.bp.blogspot.com/-f5uP67Vafp4/UWb-Pnf0ufI/AAAAAAAAD34/8PkXaZz4maw/s1600/VIX.png
Yep, you are correct, but as Mark Twain, the witty author always quipped, 'history does not repeat but it often ryhmes'. In trading, lots of curve balls are always thrown, so the VIX should pop higher in the near future well up over 20 and higher, maybe 30, maybe 40 in a huge sell off as the CPC put/call ratio projects, however, the path there may begin with a lower print first. Your chart is excellent but as mentioned previously, it is not a function of earnings seasonality, it is more a function of the central banker policies running out of gas; QE1 in spring 2010, QE2 ran out of gas in spring 2011, Operation Twist and ECB's LTRO 1 and 2 ran out of gas in spring 2012. That prompted Draghi to pledge supporting the euro by 'whatever it takes'. The anouncement of ECB's OMT program, now ongoing, and the Fed coming out saying that they will provide QE3 Infinity created the summer rally into the September 2012 market top, then the Fed added more juice in December 2012 replacing Operation Twist with the QE4 Infinity and Beyond program, ongoing now, that is performing the 85 billion per month purchases. This is where we are at now. These are likely losing oomph but the big thrust over the last couple months that was unforeseen was the BOJ easing, the weakening yen, that directly catapulted the SPX the last 50 to 80 handles. So, it is really a function of the yen and BOJ to see if the projection on your chart is correct. It should be although it may take more days or weeks to play out. The put/call says a major selling event should begin at anytime.
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