In my previous post, I showed how the VIX has recently been testing the resisting trendline extending from the March 2020 peak. In it, I said that I would look for a daily close above the trendline then begin looking to short SPY. Well, yesterday it did just that; and while today's recovery was noble, it failed to convince -- slumping back over in an arch by the close.
While testing the resisting trendline, the VIX has also been attempting to reclaim its 200 & 50-day moving average as support. As you can see, it has done so several times over the last month before finally succeeding on the fifth try. Jan. 25th saw it reclaim the 200MA and stage a false breakout before retreating. But two days later, in a move that surprised many people, it cleared all three: both moving averages and the resisting trendline.
I want to point out something important about its recovery today: not only has it broken out from its resisting trendline while falling, it has also temporarily established the 50MA as support - which is bullish. Expect tomorrow's price action to retest yesterday's lows. Any further weakness could see SPY fall to the 360-365 level, but probably not much further. There are too many people waiting to buy the dip, as the bull market is still very much intact.
While testing the resisting trendline, the VIX has also been attempting to reclaim its 200 & 50-day moving average as support. As you can see, it has done so several times over the last month before finally succeeding on the fifth try. Jan. 25th saw it reclaim the 200MA and stage a false breakout before retreating. But two days later, in a move that surprised many people, it cleared all three: both moving averages and the resisting trendline.
I want to point out something important about its recovery today: not only has it broken out from its resisting trendline while falling, it has also temporarily established the 50MA as support - which is bullish. Expect tomorrow's price action to retest yesterday's lows. Any further weakness could see SPY fall to the 360-365 level, but probably not much further. There are too many people waiting to buy the dip, as the bull market is still very much intact.