If you found yourself scratching your head today, you’re not alone. SPX finally shed a couple of points — the first loss in seven forgettable sessions. VIX reacted by selling off by 1.04. Huh? DX followed suit, settling 0.18 after being down as much as .66 from Friday’s high. Come again?
I wrote about VIX last Thursday: “The smaller harmonic patterns point to potentially lower values, so look for a drop to the mid-13s if the move up is contained.” But, never in my wildest imagination did I anticipate said drop in the absence of a run up in stocks — let alone a drop in stocks!
Whenever I’m vexed by VIX, I turn to VIXandMore.blogspot.com. I have no connection with this wonderful blog, but am frequently impressed by the depth of expertise. If you’d like the full explanation, click on the link above. But, the short version is that today was VIX roll day, and the two components of VIX (VIN and VIF — really) conspired to significantly depress VIX. One mystery solved.
As for the dollar, it broke the rules Friday — up almost .30 on a day when stocks were also up. So, today was perhaps a make-up call. The EURUSD is showing strength after completing a Crab pattern (in red, below) last week. After retracing .618 of the Jun 29 to July 24 drop, the pair threatens to complete a Gartley pattern (in purple.) The .786 (1.2552) intersects with a major channel around the end of August.
BTW, the Gartley needn’t necessarily pan out. As I noted a couple of weeks ago, there’s a very strong line of resistance at 1.24 that was broken back on July 5. Closing up above it again could take some doing (or, at least a favorable decision by the German Constitutional Court.)
I have many more charts to post, but am running out of juice. I’ll leave readers with one last chart that represents the whole lot of them. The ETF UKX is approaching its Fan Line off the 2007 high as well as the .886 Fib retracement level.
Last week, it came to within a very manageable 0.7% of tagging both. Yesterday, it closed off a bit, so it now needs 1.17% more to complete its Bat Pattern at 590.04. A number of euro zone countries report GDP tomorrow. If numbers come in at or above expectations, don’t be surprised to see FTSE go up and complete the pattern.