The vix dropped further than I expected this week but it maintained its supportive base and rebounded strongly after the jobs report on Friday. In light of this drop-bounce action, I think a repeat of the Feb or Oct 2018 market mini-crashes is still possible over the next two months. Pin pointing the exact date is extremely difficult. However, we can see in my chart that the technical factors are similar. There is an initial setup period where the fear & greed reading shows waning greed, followed by a fairly large rise in fear, another greed peak, then a much deeper rise in fear. During this same period RSI also plays out a similar pattern. (We do need to keep in mind that this time around there does not appear to be the same RSI divergence on the daily chart in the final setup phase. This could be a sign that it will not play out the same way. At the same time, if we dig deeper into the sudden vix drop week of July 1st, we will see that there was actually extreme divergence at the 1 hour interval).
If the chart pattern does play out, following the rule of alternation, my bet is the next mini-crash or real crash will be more similar to Feb 2018 than Oct; and could start as early as July 8th. In fact, at some point we should reach *real* capitulation which was not observed in either of the previous mini-crashes.
Finally, keep in mind that we could be approaching the most powerful segment of an Elliot primary degree 4th wave; or, even worse, the start of an Elliot super cycle 4th wave. Although I like to play my cards at shorting, a conservative and protective approach to money management is probably best at this point.
If the chart pattern does play out, following the rule of alternation, my bet is the next mini-crash or real crash will be more similar to Feb 2018 than Oct; and could start as early as July 8th. In fact, at some point we should reach *real* capitulation which was not observed in either of the previous mini-crashes.
Finally, keep in mind that we could be approaching the most powerful segment of an Elliot primary degree 4th wave; or, even worse, the start of an Elliot super cycle 4th wave. Although I like to play my cards at shorting, a conservative and protective approach to money management is probably best at this point.
Comment:
As of today's market rally, the blue window period should be nearly complete, provided that it does not drop past the green window low of 12.1. I suspect the hype about rate cuts is merely "hype" as Powell never said once that they plan on cutting rates as early as July. I also fail to believe a rate cut would come without a significant decline in the market first. When the truth begins to sink in, then the vix will be free to launch.
Comment:
Interestingly, the vix futures jumped from 13.1 back to 15.2 over the week. More manipulation? This move again raises the probability of my idea.
Comment:
The base at 12.1 has held and vix is rising. Fireworks could begin at any moment's notice now.
