VIX - An opening gap forecasts more pain for the stock market
Updated
In the past week, the market saw a decrease in volatility , which accompanied the relief rally in the stock market. However, just recently, we stated that we expect the rally to be shortlived and to reverse its direction to the downside. We continue to hold this notion also nowadays; indeed, we expect an eventual breakdown in the stock market and new lows to be formed on QQQ , SPX , and the majority of the U.S. indices . Accordingly, we expect this process to be accompanied by another increase in volatility . Therefore, we would like to set a short-term price target for VIX at 30 USD, and a medium-term price target at 35 USD.
Our views are supported by tightening economic conditions as well as bearish technical indicators pointing to the more downside in the stock market.
Illustration 1.01
The picture shows QQQ on the daily chart . Two parallel white dashed lines constitute a downward moving channel, which is a bearish structure. The recent breakout below the structure indicates a very strong bearish trend of a higher degree. The sloped white dashed line acts as a resistance; on Nasdaq 100 continuous futures , the price is much closer to resistance.
Illustration 1.02
Illustration 1.02 shows the Nasdaq 100 continuous futures on the hourly chart. The yellow arrow pinpoints a perfect bull trap we outlined in our idea on QQQ .
Illustration 1.03
The SPX shows a bearish resemblance with the Nasdaq 100 index .
Illustration 1.04
The picture above shows a negative correlation between VIX and SPX, and Nasdaq.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Our views are supported by tightening economic conditions as well as bearish technical indicators pointing to the more downside in the stock market.
Illustration 1.01
The picture shows QQQ on the daily chart . Two parallel white dashed lines constitute a downward moving channel, which is a bearish structure. The recent breakout below the structure indicates a very strong bearish trend of a higher degree. The sloped white dashed line acts as a resistance; on Nasdaq 100 continuous futures , the price is much closer to resistance.
Illustration 1.02
Illustration 1.02 shows the Nasdaq 100 continuous futures on the hourly chart. The yellow arrow pinpoints a perfect bull trap we outlined in our idea on QQQ .
Illustration 1.03
The SPX shows a bearish resemblance with the Nasdaq 100 index .
Illustration 1.04
The picture above shows a negative correlation between VIX and SPX, and Nasdaq.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Trade closed: target reached
VIX rose by 7% and hit our short-term price target of 30 USD; 35 USD is the new short-term price target.
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