VIX spent the past month edging higher, finally breaking out of the falling white channel that has marked tops since Dec 30. There were numerous intraday plunges, as needed, in order to keep stocks from slumping.
But, with SPX threatening to put in a dreaded 1% drop last week, VIX was pressed back into action, descending back into the falling white channel, breaking down the rising purple channel and — drum roll please — making its 8th voyage below the long-term yellow channel bottom.
It was enough to merely postpone Friday’s drop to our next downside target — which should be tagged this morning.
continued for members…
This morning’s rundown…
USDJPY has finally completed its backtest of the falling white channel.
CL is pulling its usual pre-opening ramp — to overhead resistance.
SPX is pointed to the same targets as before, though the SMA10 (2370.49) is a little closer to the gap close (2371.54) and the purple channel bottom around 2367.89. Any of them could serve as a bottom this morning. We should know when the bottom is in because CL and USDJPY should climb higher and VIX should collapse.
UPDATE: 9:40 AM
SPX has tagged the gap close and the SMA10, but is a little short of the .786. The safe bet is to cover here, but I think we’ll reach the channel bottom.
UPDATE: 9:49 AM
That might be the end of it, even though it’s a little shy of the channel bottom and the .786. VIX has steadily declined — right to support at the SMA5 200 and SMA5 10. If it drops through the red midline at 11.35, then we can assume they’re serious about this being a bottom.
UPDATE: 10:02 AM
ES has overhead resistance, and VIX is getting a little bounce off the red midline. So, maybe we’ll get down to 2367.89 after all. If it happens, it’ll be a quick trip as any delay would mean lower prices (i.e. the falling purple channel reaches the .886, etc.) Back to short if you want to play along.
UPDATE: 11:02 AM
There’s the .786 — or at least pretty darned close. CL dipped to a TL of support, but VIX is threatening to break above the SMA20 and white midline. My guess is this is the turning point. Back to long here with tight stops.
We’ll see what happens when SPX SMA5 10 catches down to it. I’d keep a close eye not only on VIX, but CL’s red TL and USDJPY’s little red TL.
UPDATE: 11:37 AM
SPX and ES are dipping below their SMA5 10s. Could be a head fake, but I’d take it seriously. If ES drops through the red TL shown below, we could easily see the .886 at 2363.98 play out. It would correlate nicely with VIX tagging the intersection of the rising white channel top and falling red channel top at around 12:05. It would almost certainly be signalled by CL and USDJPy dropping through their TLs of support.
UPDATE: 12:03 PM AM
Still on the fence…
UPDATE: 1:14 PM
The meltup reaches its first official resistance as ES tags the top of its falling channel and SPX its SMA5 100. Note that SPX has closed the gap from Friday, and has erased about half this morning’s drop. 2379.93 is looking like an attractive closing target.
UPDATE: 2:31 PM
If they’re going to keep the bounce alive, we need to see VIX break down from this little white channel and CL and USDJPY hold their red TLs.
UPDATE: 3:43 PM
Probably close enough. I’d go ahead and close the long position from 2367.89. The SMA5 200 should be strong enough resistance to put an end to the meltup — even though the chart still indicates 2379.33 is a good possibility. As always, only hold short overnight if you can hedge or handle the gap risk.
