Monday, 12 November 2012

Volatility knocked lower

On a trading day where the indexes closed flat, and where volume was the lowest of the year, the near term VIX was significantly lower, closing -10% @ 16.68. The whole formation since late October could be a giant inverse H/S formation, if so, then a VIX explosion >20 is imminent.




Whilst the indexes were flat today, it was mostly a day where many turned their attention to the volatility index. The VIX managed to close at the lows of the day, although as many have come to realise, it is the near term VIX futures that have got smashed lower, anything beyond front month is still holding up very well.

Giant inverse H/S ?

Its not labelled on the chart, but there is a very viable inverse head and shoulders formation -as best seen via the hourly chart. VIX really needs to hold the 16.50 level to keep the formation intact. A daily close <16.00 tomorrow would violate any hope of that.

However, lets be clear, if it is a inv. H/S, then a VERY strong up move in the VIX should start to begin tomorrow, and continue into Wednesday. First target would be 20/21, and considering the indexes, that would probably equate to sp'1345 - which happens to be my primary target for this cycle.

So, for tomorrow, bears really need to see the VIX open higher..and keep battling higher, preferably back into the 18s.

more later.