timwest

VIX Index Retracements After Spikes & How To Find Support

INDEX:VIX   CBOE Volatility Index
654 11 14
CBOE Volatility Index             - VIX             - Daily versus SPY             ( S&P500             SPDR)

Sharp DROPS IN VIX             have always been RE-TESTED

1. Look for sharp drop in VIX             after a spike (Note: This is usually accompanied by a rally in stocks )
2. As soon as there is a 75% retracement of VIX             , mark the level of stock prices.
3. The market will revisit this level once the short-covering euphoria is over.
4. See all examples. The last one completely blew up.

So, It looks like this is a very reliable read on VIX             and what it means for the future of the S&P500             .

Tim 3:03PM October 21, 2014

NOTE: THIS DATA IS ONLY THROUGH YESTERDAY'S CLOSE - FOCUS ON THE OLD SIGNALS
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timwest PRO
2 years ago
I added some more boxes and arrows ----
snapshot
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millie PRO timwest
2 years ago
Thanks for the insight. Is the next 75% VIX retracement around 18.33 or 16.39? If so, the SPY retest could be at today's or yesterday's levels?
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timwest PRO
2 years ago
I hope this can give you an extra "HIDDEN LEVEL" in the market to find "KEY SUPPORT" where others fail to see it.
+1 Reply
christopherbrecher PRO timwest
2 years ago
Tim, can I call u this afternoon?
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IvanLabrie PRO
2 years ago
This is great...really interesting correlation.
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Tim, I'm not sure I understand. Is this chart saying that the lows will be tested?
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timwest PRO christopherbrecher
2 years ago
The last time it was fully retraced. In a bull market, it seems that the 75% retracement level gets retested after the upside momentum wears off. It becomes a natural "support level" on pullbacks. It means that you don't have to chase the market any further up once the VIX comes back 75% from the spike. It's not perfect, but it's a decent indicator or where support is in the market.
+1 Reply
christopherbrecher PRO timwest
2 years ago
thx!
+1 Reply
Will Wong timwest
2 years ago
Not sure I understood you. Last Thursday on 10/16/2014, the VIX topped out at about 30. Over the next three sessions, it proceeded to drop sharply (accompanied by a sharp rise in stock prices). Presumably it bottomed on 10/21/2014 and today it started going up again (accompanied by a drop of the stock market as well). if VIX continue to retrace to 75% of the drop (from 10/16 to 10/21), the stock market will also drop accordingly. We are to note the stock price when the VIX retraced 75% of the drop. You said that in the future when the upside momentum wears off the stock market will revisit this value again and this becomes a support. In putting my thoughts to words, I think I am starting to understand your logic. Does this capture the essence of what you were trying to say? Thanks!
+1 Reply
timwest PRO Will Wong
2 years ago
Yes, the level of buying that drives the market up and correspondingly drops VIX back down 75% of the run-up is a strong level of support.
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Will Wong timwest
2 years ago
You mentioned in another post that the 75% retracement of the VIX will correspond to a 1940 for the SPX (actually 194 for the SPY). Is that correct?
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