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VIX Watching

WhaleThis morning’s large gap move into the $ES 2011 area has again been reversed. $ES highs continue to be made in overnight trading, but not during actual trading hours. Markets continue to act disjointed with wandering rotations all over the place. Per my “Tops” write-up from yesterday all this action continues to fit the bill of a topping process. Yet long term trends remain well supported.

As the action unfolds I’m closely watching the $VIX. Yesterday’s sudden 11% ramp certainly raised some eyebrows, but it was solidly rejected near its 200MA as it so often does. Yet the structures I’m watching would not be inconsistent with a rather larger upside move in the making. And possibly very soon too:

$VIX daily

The MACD appears poised for a major cross-over as the build is comparable to similar set-ups over the past year. Mind you the $VIX is trading historically very low and has been since Ben Bernanke’s QE3 monster. So even a jump into the 18-20 range wouldn’t be all that impressive, but would certainly be consistent with a small market pullback here.

The weekly chart reveals the key resistance points of a standard move here, but also shows where such a move may yield something more consistent with longer term moves:

$VIX weekly

Certainly a break of the longer term $SPX trend line (yes it will get broken at some point) will likely invite a sudden $VIX spike not seen in years. For now we can continue to observe a positive divergence as the $VIX is just not buying these overnight $ES highs. For now the trend line resistances remain relevant:

$ES

It may actually take actual day time buying to get over that hump. Maybe Mario Draghi will bless the world with more central bank QE manna tomorrow. But if the $VIX has anything to say we may actually experience a down day one of these days. Imagine that!

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Categories: Daily Market Brief

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