Welcome to Chart Chatter where we discuss various technical charts we find of interest. We cover indices, signals and stocks on different timeframes highlighting different technical techniques we use over time. We’ll focus on key observations we find relevant which readers may find of use for their own trading.
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Let’s have a longer term look at the $VIX.
The volatility compression years of 2016 and 2017 printed a large declining wedge following a precise pattern of lower highs and lower lows. This bullish pattern bursted to the upside in February 2018:
Several key things to point out:
In 2017 we saw a secondary trend line develop as resistance, this trend line has become support in 2018 as has the upper trend line.
While $SPX briefly has made new highs in August these trend lines have again confirmed as support.
In addition, we can observe a new descending wedge forming on top of the previous wedge. This pattern is tightening, but has room to go lower.
At the same time we can spot a potential inverse on the $VIX, the right shoulder of which has pushed the $VIX against its upper trend line. Note there are 2 upper trend lines which are currently resistance. A confirmed break above these trend lines would likely trigger a sharp spike in the $VIX.
$VIX has shown multiple lengthy periods of consolidation in between spikes and this may happen here again. However, for now the potential inverse pattern has not been invalidated and $VIX is nestled right against the upper trend lines making the $VIX a key chart to watch here as it appears to be at a pivotal point.
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Categories: Chart Chatter