S&P volatility as measured by the VIX is in a state of collapse to record lows, implying almost for certain that a great many traders had been expecting the stock market to do “something crazy” and bet heavily on it. We laid down a belated, longshot bet ourselves today in VXX, an ETF vehicle pegged to VIX, and we’re prepared to wade in even deeper if volatility continues to implode. Not surprisingly, online opinion is sharply divided over what stocks might do next. One more short-squeeze spike before They pull the plug? An avalanche out of nowhere? Tedium for more weeks than any of us have the patience to abide? Place your bets.
There’s a Reason Why Volatility Is Collapsing
- May 2, 2017, 5:45 am
Just recently VIX has created a major breakout, it had closed for 9 consecutive days over its 50 and 200 DMA. It is also ready for the 50 DMA to cross over its 200 dma another pre buy signal towards the larger degree.
The process to observe is now the raw price index action, as the pull back in VIX is now in its 7th trading day, observing major index pricing moves towards a lower high lower low process suggest the VIX breakout is being confirm.
The next high in VIX should be or near a lower VIX high reading while the major indexes create a lower low, this is a lag process and will confirm VIX is ready to go.
VIX actuality lags market action its like a ‘siphon’ process, once it is prime the flow will start and the filling of the bucket of volatility will begin.