Dr_Roboto

Something maybe afoot in the VIX

CBOE:VIX   Volatility S&P 500 Index
The VIX is the most oversold on the 1D time frame using the cRSI than it has been during this whole rally and actually in several years. Now, that on the surface does not mean one thing or another. It could mean the market is finally comfortable with the S&P and things are all good. However, what concerns me is the fact that it has not returned back to its mean channel and the MACD is noticeable negative and looking to cross over. The MACD crossover is also not an absolute sign in the VIX either. It can ride along in the positive (green) for quite a while before it makes a bigger move. Another thing to note is that the VIX is sitting right on top of its normal channel. Again, not clearly anything as the VIX has been way above that channel since Feb.

Here is an interesting thing I noticed about the VIX . You can clearly see the correction after the S&P Sept FOMO top at two peaks. Notice that the VIX did not settle all the way back down in between. It stayed elevated during the whole correction and only went back down after the recent rally even though that rally was not that much higher. Now remember that the VIX has not settled back down to its previous levels since it spiked in March. Does this mean we are sitting in the middle of a massive correction and there is still a big drop to come? Don't know, but some food for thought.

Now lets turn to the VVIX . That effective is the volatility of the VIX (derivative of sorts from your calculus days). There we can see a clear trend of a higher lows and a support trend line forming (weekly and monthly). This supports that idea that the VIX should be bottoming and looking to move up. You can also see that it recently (Nov 27) was below the bounds on the cRSI and made a bottom.

I also have my "custom" VIX / SPX indictor. The point behind this ratio is to look for the VIX rising more relative to the SPX . The VIX has a tenancy to go exponential when it goes up, thus we should see VIX increase faster than the SPX and the VIX / SPX ratio should also start to increase (larger numerator over a smaller denomenator). Now, this again is showing signs of life, but the signs are still weak. The cRSI is oversold and the RSI is getting close to a cross over.

All in all, nothing is conclusive yet. However, there are signs starting to show of some form of correction up coming. If you follow my other posts, this is most likely linked to the topping of the S&P at the 1.236 fib level. I am surprised that we are not seeing it rise more like we did at the end of August for the big FOMO top. That 1.236 level is very important. Maybe all the bears gave up? Maybe the bulls have won? I will keep you posted.

Comment: Trending towards a correction, but still not conclusive.

VIX (4h)

VVIX (4h)

VIX/SPX (1D)
Comment: End of day Friday update.

Not a great end of the week but things overall are still higher than the beginning of the week. Still not clear direction but flat is still good for the bears.

VIX - Broke below the green support but above recent low

VVIX - Broke below the green support but held the pink.

VIX/SPX - Still no confirmation yet, but that MACD is getting close and the low for today as still higher.

Comments

I am the best lagging indicator, when I feel like throwing a bunch of money at the market it's close to the top
+4 Reply
Dr_Roboto MRPAPAYA001
@MRPAPAYA001, I literally LOL. You made my day. Thanks.
Reply
This may be best technical analysis on Vix I've seen on Tradingview. Love your work buddy, keep it up! Holding UVXY, HUV right now, but getting beaten as bulls moonwalk on top the megaphone resiatance trendline. The life of a bear.
+1 Reply
ProfitHarvest Hedge_Of_The_World
@Hedge_Of_The_World, #bearlife
+1 Reply
Hedge_Of_The_World ProfitHarvest
@ProfitHarvest, Tell me about it. Love your work too btw. I've read a lot of your stuff. Just realized (for some reason), I'm not following you. Changed that. Cheers!
+1 Reply
Interesting analysis! I also think that there is some interesting VIX action going on. It's worth nothing that January VIX futures rest at 24.5, a few points higher than the current spot vix.

Opposed to technical analysis, I've built a relatively succesful with a neural network that I coded in 2019 that's able to predict market reversals well (given lag error of up to a week) and I rely a lot on some dark pools information.

Since Thanksgiving week it's been bearish on the S&P500 and Dow Jones (which have more or less been flat since) however bullish on the Nasdaq. Just yesterday after the Nasdaq hit it's all time high, it's now equally bearish on all 3 indices for the next month.

Dark pool volume has also been lower than it was since the summer months. A lot of DP buying volume had stopped around the 3320 S&P level during the summer months before the September correction (close to where it was before the COVID crash). However, a good amount of dark pool buying volume came back in when we hit those levels around September 23 and October 30 (just before the election).

I'm confident that there should be a slight correction sometime later this month or in January, however the 3300-3400 are key S&P levels. I think the markets are worried about the looming government shutdowns, stimulus, vaccine supply chains, and the Jan 5 Georgia runoff elections since January VIX futures are higher than the current spot.

At the moment thought, the markets keep going up on lighter volume and no one has been selling since there isn't much broad reaching bad news.
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Awesome volatility work as always! Market liquidity still strong so need at least another week.

What seems to be happening is irrational exuberance artificially holding VIX low. I’m lookin at that purple trend that meets the green at a point. When we look back 6 months from now that’ll probably be a mean reversion trendline.
Reply
Dr_Roboto ProfitHarvest
@ProfitHarvest, another week? Is that not what you said last week, and the week before, and ....., like 3 months back ;) Just having fun.

The level of irrational exuberance in this market just boggles my mind. I just can't believe that it keeps going up. We have run out of reasons for it to go up, but still it goes up. The argument all summer was the market is forward looking and pricing in the vaccine recover. Well the vaccine is just around the corner (already announced) and prices are still going up. The bulls want it both ways. I still remember in July thinking to myself this has to be the end for the S&P. I saw that 1.236 fib ext still a ways up there and said no way will it go that high, but here we are. The market needs to correct, but I don't think it will. If the S&P breaks the 1.236 level it will be a bubble run to at least 4000 if not 5000.
+3 Reply
ProfitHarvest Dr_Roboto
@Dr_Roboto, Seriously though... feelin like Tom Cruise in Edge of Tomorrow here ;).

Naw I think market forces will counteract the run well before it makes it to the next fib.

This market tanks every time liquidity is weak.
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