alice, nftrh

VIX Tickles Target Zone, Refining Target w/ Daily Chart

Just a short FYI update.  VIX, touched the top end of the 20 to 22 pullback target zone.  This was accompanied by a bounce in the S&P 500 to 1988 and subsequent fade (+.23% at 1973.88 at time of writing).

We were roughly looking for SPX 2040 and VIX 20-22 as a potential bearish setup.  VIX hit 21.51 earlier today.

Here is the weekly chart we have been using, showing the target zone getting hit.  It seems easy to project now but was not so easy when VIX pierced ‘crisis resistance’.  As part of the healing process, some critical mass of people need to become more complacent and not fear the market.  They need to feel that things are in control again.

To be sure, weekly VIX is still elevated, but relative calm is taking hold.  So let’s call the VIX’ initial target zone in the books.

vix weekly

The daily chart dials the VIX in.  When we projected 20 to 22 that was accurate enough as a marker, considering the wild ride markets were on at the time.  This chart shows 20 and the rising 50 day moving averages as a finer point of support.  Call it 18-20.

vix daily

Of course, today’s in-day fade-o-rama has given bulls something to think about.  But the bounce situation is still intact (though now becoming a grind to bulls and bears) and as long as that is the case we can continue to target a combo of SPX 2040 and VIX 18-20 as bounce resistance and a lower risk bear opportunity.

If the bounce ends up failing at Resistance #1 (roughly equiv. to SPX 1975), then we should remember that there will be future setups.  This could be bullish from the Oct/Aug lows or bearish on a failure of those lows.  This will take patience.  Personally, I am going to feel no need to try to trade the market’s every twitch until we get a firm marker like 2040 (upside) or Oct/Aug lows (downside).