VIX Feels Like a Smoldering Volcano 🌋 Post-2020 Parabolic Move

TVC:VIX   Volatility S&P 500 Index
The consolidation pattern in the VIX goes back to June 2020 after the initial COVID flash-crash scenario.

From June '21 to November '21, you started to see a bottoming formation turning into a new uptrend, subtle as might've been. The uptrend has chopped around in this rising channel since the end of 2021 up until the recent false breakdown during August 2022.

This head fake has allowed the VIX to retake the bottom of the channel and continue up and up after every headline the market fears. Despite the approach of overbought levels, the bear market rally on Wednesday, September 28 gave volatility room to run.

It appears probable a consolidation pattern around 36-38 will level off the relative strength as of late, occurring for the month of October when the market could stage a short-term rally. Coincidentally, this will set up the VIX right into the midterm elections...

To be clear, sirens won't start popping off on SPY QQQ and DIA until a decisive, sustained move over 36.79 occurs. If that happens, a move to 47.20 seems like a no-brainer.

Notably, that is a test of the top of the rising channel, confirming 2 technical scenarios with the midterm elections as the catalyst for the next leg.

Keep your head on a swivel and keep an eye on the volatility of VIX TLT and DXY for directional signposts in the broader market. Also, it's important to remember Jerome Powell and other Fed officials, Russian tensions, Europe energy or monetary headlines, and CPI could all eliminate this hypothesis.


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