$VIX SPIKES & 75% RETRACEMENTS GRAPHED FOR VISUALIZATION

When $VIX SPIKES by more than 5 points and then RETRACES BY 75%, something VERY IMPORTANT HAPPENS.

What is important about that? Well, one thing. When $VIX spikes, the market becomes ILLIQUID and options sellers run out of capital to provide liquidity to the market so that the prices of options have to INCREASE to bring more liquidity into the market.

Why is that important? Simple. Higher prices bring in more supply. That's how we are all wired. If the price of something goes up, we want to sell it because the returns are more attractive from selling options.

So, when stock prices FALL and $VIX rises, it means that people are SELLING STOCKS and BUYING PUTS to hedge their positions and stop from losing more capital than they can imagine or afford to lose.

What happens NEXT is important. When $VIX then drops back down, it means that longer term buyers have stepped into the market to PROVIDE LIQUIDITY and accumulate the shares sold by shorter-term, more nervous owners of shares.

SO - We can THEN INFER that the sellers are the WEAK HANDS and the BUYERS are the STRONG HANDS so when the market drops back down to the level where the longer term buyers stepped in to provide liquidity, you would expect logically that the market would find support.

Sorry to give away the secret to reading $VIX, price action, liquidity and logic. Soon you will have a firm grasp on what is going on and be able to act without being irrational at market extremes.

Welcome to TradingView and join me in the Key Hidden Levels Trading Room.

Best regards,

Tim.

11:09PM 11/8/2018

Note: This article is "NEUTRAL" because the $SPY is so far above the support from the $VIX 75% RETRACEMENT SUPPORT LEVELS.

评论:

There was a VERY CLOSE to 5 points rise in $VIX back in January

Here's how the $SPY looks now after that signal.

Feb 9, 2019 - Saturday 2:21PM EST

评论:

Here's a larger picture since it didn't include the "failed" or "aggressive selling" that showed up in Late November. When a VIX 75% retracement fails, it means that there are aggressive sellers dumping stocks into the market.

Note how the Blue Triangle failed to create a rally out of the pattern and it immediately fell under the low? Note it fell about 2 of those lower from there to find a low. That was strong selling.

Feb 9, 2019. Saturday 2:26PM EST

评论:

The most recent 75% VIX spike was May-June 2019.

The current pullback is testing the mid-point of that important support level.

Tim. August 15, 2019. 11:33AM EST $SPY 284.50 last

评论:

Another re-test of the $VIX 75% Signal. Surprised it didn't hold the higher, first level, but it did hold the lower level that had already been tested.

IF the market goes under the support level that has been tested twice, then prices call move down dramatically. Stay tuned.

Tim. 10/7/2019. 12:04PM EST