VIX $2.9 Trillion wiped on recession fears. Is the worst over?The much lower than expected Nonfarm Payrolls today (114k against a 176k forecast) amplified the global recession concerns and wiped out $2.9 trillion from the stock markets, making it the worst day since the 2020 COVID crash.
With Nasdaq down almost -12% from its recent peak, investors are more or less convinced of the necessity of a September Fed Rate cut in order to restore confidence in the market. But is the worst over yet?
Well, lets take a look at the Volatility Index (VIX), which last time we analyzed it (April 16, see chart below), helped us take the most optimal buy entry on the stock market as it got rejected right at the top of its 10-month Channel Down:
Today VIX was up almost +90% from its daily Low, displaying enormous market volatility. It is useful in times like these to look at the multi-year price action in order to keep an objective technical perspective.
As this 1W chart shows, a VIX price this high is a rare feat since the 2008 Housing Crisis. In fact the break-out above the Channel Down resembles the Highs of December 24 2018 and October 13 2014 (blue circles). Those that been the lowest levels of alerts on the VIX scale, with the medium ones being the orange circles and the worst ones being the red (only happened twice: October 20 2008 and the COVID crash of March 16 2020).
At the same time, the 1W RSI just broke above the 70.00 Overbought barrier, which has only happened another 6 times since the 2008 Housing Crisis. It is easy to understand as a result, that this VIX spike has more chances to be corrected in the coming weeks than ending up in a larger stock market correction.
On our current chart, the stock market is represented by the S&P500 (black trend-line). As you can see, a strong recovery (green Channel Up) followed after the blue VIX peaks. In the event however that this turns out to be an orange VIX peak next week, the S&P500 is expected to start recovering within 4-6 weeks.
Which case do you think it will be?
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VIX trade ideas
The Fear Index and Geopolitical TensionsIn an era marked by geopolitical tensions and economic volatility, the fear index emerges as a crucial tool for traders seeking to navigate turbulent markets. This article delves into the historical significance of the fear index, exploring pivotal moments like the Cuban Missile Crisis, the 1973 Oil Crisis, and the 2008 Financial Crisis. By understanding how investor psychology and market sentiment intertwine with the fear index, traders can gain a competitive edge.
In today's world, marked by unprecedented geopolitical tensions, understanding the fear index has never been more crucial. As global conflicts escalate, the fear index provides essential insights into market sentiment and helps risk managers navigate through these turbulent times.
A Geopolitical Powder Keg
We are witnessing a convergence of significant geopolitical events:
Russo-Ukrainian Conflict: Ongoing hostilities have far-reaching implications for global stability.
Middle Eastern Volatility: Potential for a full-scale war involving major powers like Israel, the U.S., and Iran.
Sino-Taiwanese Tensions: Threats of a Chinese invasion of Taiwan with severe repercussions for the semiconductor industry and global economy.
Pro-Palestinian Protests: These could escalate into widespread violence, further destabilizing the political and economic landscape.
The Role of the Fear Index
The fear index, often measured by market volatility, acts as a barometer of investor sentiment in the face of these geopolitical risks. By closely monitoring the fear index, risk managers can gain early warnings of market disruptions and develop strategies to mitigate potential crises.
Historical Context
Historical precedents show how the fear index responds to geopolitical tensions:
Cuban Missile Crisis (1962): Stock markets plummeted due to heightened anxiety, underscoring the impact of geopolitical events on market sentiment.
1973 Oil Crisis: The Arab-Israeli War and subsequent oil embargo led to global economic downturns, reflecting the fear index's potential spike during such crises.
9/11 Attacks: The fear index surged as markets reacted to the unprecedented nature of the terrorist attacks.
2008 Financial Crisis: Global financial instability caused a dramatic increase in the fear index, providing early warnings of the impending market collapse.
COVID-19 Pandemic: The pandemic's economic halt saw the fear index spike, signaling early disruptions.
Methodologies for Calculation
Understanding how the fear index is calculated enhances its utility:
Volatility Indexes (e.g., VIX): Measure implied market volatility.
Sentiment Analysis: Assess sentiment through news and social media.
Investor Behavior Metrics: Analyze options trading and margin debt levels.
Combining these approaches offers a comprehensive view of market fear in response to geopolitical tensions.
The Psychological Impact
Investor behavior during geopolitical crises is influenced by:
Loss Aversion: Heightened sensitivity to potential losses.
Herd Mentality: Following the crowd amplifies reactions.
Availability Heuristic: Overestimating the probability of easily recalled events.
Strategic Applications
Risk managers must adopt a holistic approach, integrating the fear index with geopolitical and economic data to develop robust contingency plans. While the fear index can't predict crises' exact timing or magnitude, it provides valuable early warnings to prepare for potential disruptions.
Conclusion
The fear index is indispensable for navigating today's geopolitically charged environment. By monitoring market sentiment and identifying emerging trends, you can protect your investments from unforeseen events and build resilience. Embrace the insights offered by the fear index to stay ahead in these volatile times.
#VIX prediction for next weekAs can be seen, the price appears to be completing a triangle pattern, which could be interpreted as wave 2 or wave b. Either way, we could expect another rally to complete wave 3 or c.
This analysis is triggered once the price breaks above the previous high, and any bearish retracement could be a buying opportunity.
Let me know if you would like me to publish an analysis in a lower timeframe on this chart to take advantage of this rally.
VIX 20 years Later !What will fuel this next Bull Market?
#AI and exponential gains in productivity seem like a fair bet.
The technology won't manifest properly in the next few years of course.
But the speculation and new companies will.
20 years ago we saw the trendline of the #VIX break
coming out of 9/11 and right around the time of the Iraq war
Military spending, Lowering of rates, a Housing boom , and the rise of Google and culminating in the iphone.
Seems eerily similar to the current #macro environment
$VIX Volmageddon TVC:VIX is bouncing at the moment, on the 15 minute chart, which is my favorite time frame to trade anything on. I'm really liking the volatility lately. Flirting with the top monthly trend line, but holding support into this curl up. Tuesday's FOMC could be the catalyst. See daily and monthly charts posted prior.
$VIX Volmageddon On the daily chart, TVC:VIX is in great shape, even though it's down ~11% today. SP:SPX AMEX:SPY NASDAQ:QQQ etc. are building into that right shoulder of what appears to be a head and shoulders. So I expected TVC:VIX to be crushed into it. Obviously if the H&S patterns play out, TVC:VIX should spike.
There's a strange repeating pattern in the VIX (angles)make of this what you will but I've noticed the VIX has a repeating pattern that follows a repeating pattern. that white trendline you see is the exact same angle in every iteration. I think we may be repeating a yellow box pattern of lower volatility for the next 1-2 years. What do you think about this?
VIX SP500: BAT and SHARK possibleVIX SP500: BAT and SHARK possible
possibility of a harmonic figure "shark" and "bat" which would bring the price to the levels indicated on the chart.
In addition there is a divergence on the R.O.C and the RSI.
monitor the Fibonaccio and Ichimoku levels as well as the exponential moving averages 50 and 200
VIX Resistance TestI usually prefer to use VX or UVXY for analysis, but VIX can have its uses as well. Today it rejected nicely on a retest of a trendline it had broken below earlier in the year. This supports my idea of this being a bottom for NQ, but it can go hard the other way. Critical spot here for the future of NQ and semiconductors.
VIX neutralMost probably from how i have been treating the US stocks over the years, we are looking foward to consolidation for few then at the break of the compression we will be looking at the stocks plunging
This is just an outlook will only going to work on them once the sentiments have been proven
$VIX likely falters some time later this yearTVC:VIX analysis
Weekly the VIX showed a doji last week. This showed a sign of possible of reversal. However, it has sputtered this week.
Daily shows that weakness a bit better.
We got the bump we expected but IMO the VIX EVENTUALLY, later in the year, falters.
SP:SPX looks kind of dazed as well.
CBOE:VXN AMEX:VXX