VIX’s Strategic Retreat

On March 18, 2020, VIX topped out at 85.47, the highest level since the GFC.  It didn’t stay there long, as central bankers around the world swung into action to save their respective stock markets.

But, its peak was to become the start of a well-defined falling channel (below in white) which has consistently marked turning points for each subsequent rally in the “fear index.”

Given that VIX is perhaps the most important element in signaling buy/sell decisions for algorithmic trading – and all the passive strategies which follow algos’ lead – these reversals have become relatively foolproof all-clear signs to buy the dip. It is no surprise, then, that futures are up over 30 points after VIX reversed at our latest upside target on Friday.Could VIX’s latest reversal be any different from all the rest?

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