Markets – Macro – Technicals

$VIX

This page tracks previous versions of $VIX (Volatility). For the most up to date chart please see: $VIX

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July 22, 2017

Talk of the town is the continued record compression in volatility. As no historical precedence exists it raises a number of questions. I will not address them here, but technically speaking the compression action continues to fit inside an ever tightening wedge pattern which demands eventual resolution to the upside. The lower trend line may again be the target. Failure to print a new low may constitute a lower high. A minimum target for 2017 remains the eventual tag of the upper trend line. This broader historic range is much higher than that and a break above the trend line may constitute a change in volatility regime.

For further charts please click the image below:

July 7, 2017

This first week brought a little volatility but the historic compression continues so far. That said the quarterly chart shows something of potential interest. The recent lows were some of the lowest registered in any given quarter. Historically these compressions have reverted back into the historic range.

So far, and it is early in the new quarter, but so far the pattern of a higher low is historically consistent. This suggests a new high in volatility for 2017 coming during this current quarter.

July 5, 2017

A long term chart of the $VIX highlights how low $VIX is trading on a historic basis at the moment. Specifically a look at the weekly 500MA reveals how disconnected the $VIX is from this key pivot. In periods of low volatility it serves as resistance in periods of high volatility it serves as support. In any given year the $VIX visits the weekly 500MA at least once a year, the only exception being the period between 2004-2006 which came right off the lows in 2003.

Given this track record a visit toward this historical pivot in 2017 is a high probability event. Currently at 20.45 this zone also coincides with an open gap.

 

July 2, 2017

Volatility has never been more compressed than now. Betting on further compression is betting on the unprecedented to continue as 99% of all volatility history is higher.

Still every single tiny volatility event is hammered into the ground the moment as it occurs. Indeed the latest volatility event did not have permission to last more than an hour.

The process of shorter and shorter volatility events ha produced a chart with ever lower highs and lower lows.

However, most recently, we have also witnessed slither higher lows forming whats could be seen as a rounding bottom.

Whether market prices evolve higher or lower is almost irrelevant to the $VIX now from our perspective. We see higher volatility coming which may well be accompanied by higher prices, however, ultimately we see this pattern destined to break to the upside in a major way.

For 2017 we are still looking for a tag of the upper trend line, however a break above it could result in a major, and for many, unexpected volatility event not unlike the August 2015 event. Such a volatility event would not unlikely be accompanied by higher prices, but rather by much lower prices in markets.

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