VIX Fighting Back 7/23/2020
This is the VIX at the 4 hour view.
Okay, I was wrong yesterday. I'm not afraid to admit that I am wrong because I actually have a backbone. I thought that the future volatility run would be early next week. The VIX did a test of support early this morning and found support again at the dashed green line. It created a double bottom and tried to escape from the support/green zone.
Personally, I'm happy that volatility is coming back. VIX had me worried right there, but the VVIX was reassuring me to keep faith.
Now, why did the VIX jump like that? It's because institutions are resuming their distribution cycle in the NASDAQ and sending the cash to undervalued sectors like financials or utilities. That's why big tech and biotech got the big red candles today and dragged the ES down.
VIX was primed for a jump for the past 3 days. The VVIX (implied volatility) was indicating a bullish divergence for the VIX. The VVIX was higher than where the VIX was yesterday. P/C Ratio started at 0.51 this morning and ended at 0.77. Below 0.70 is considered extreme on the call side. That's why the VIX refuses to close below 24. It recognizes that P/C Ratio as a buying climax. The 9 DMA and 200 DMA both acted as resistance and smacked the VIX back down again.
I don't believe in triple tops from a statistical viewpoint. If the VIX goes for that 200 DMA one more time, I think it will breakthrough. If it passes that blue line above (wedge resistance), then it's going to get ugly in the ES.
Keep in mind. Liquidity is pretty high. So these volatility runs may only last 1-2 days. 3 days if you're lucky. APPL, AMZN, FB, and GOOGL report next week. Translation: These companies may get a pre-earnings hype rally. Combine that with higher liquidity and the ES nearing support zones, a big bounce would be in order soon. I'm waiting for how this pullback plays out.
This is why I exited my equity longs last week and was waiting for this pullback. This is the easier way to be a volatility trader. You can use the VIX, VXN, VVIX, and P/C Ratio to warn you when a pullback is coming soon. You don't long the VIX unless you are very experienced with the ins and outs of what I mentioned. I don't long the VIX anymore because Credit Suisse delisted my precious TVIX (nicknamed Talia Vixen). She was an attractive, crazy lady who I end up coming back to for some reason.
Okay, I was wrong yesterday. I'm not afraid to admit that I am wrong because I actually have a backbone. I thought that the future volatility run would be early next week. The VIX did a test of support early this morning and found support again at the dashed green line. It created a double bottom and tried to escape from the support/green zone.
Personally, I'm happy that volatility is coming back. VIX had me worried right there, but the VVIX was reassuring me to keep faith.
Now, why did the VIX jump like that? It's because institutions are resuming their distribution cycle in the NASDAQ and sending the cash to undervalued sectors like financials or utilities. That's why big tech and biotech got the big red candles today and dragged the ES down.
VIX was primed for a jump for the past 3 days. The VVIX (implied volatility) was indicating a bullish divergence for the VIX. The VVIX was higher than where the VIX was yesterday. P/C Ratio started at 0.51 this morning and ended at 0.77. Below 0.70 is considered extreme on the call side. That's why the VIX refuses to close below 24. It recognizes that P/C Ratio as a buying climax. The 9 DMA and 200 DMA both acted as resistance and smacked the VIX back down again.
I don't believe in triple tops from a statistical viewpoint. If the VIX goes for that 200 DMA one more time, I think it will breakthrough. If it passes that blue line above (wedge resistance), then it's going to get ugly in the ES.
Keep in mind. Liquidity is pretty high. So these volatility runs may only last 1-2 days. 3 days if you're lucky. APPL, AMZN, FB, and GOOGL report next week. Translation: These companies may get a pre-earnings hype rally. Combine that with higher liquidity and the ES nearing support zones, a big bounce would be in order soon. I'm waiting for how this pullback plays out.
This is why I exited my equity longs last week and was waiting for this pullback. This is the easier way to be a volatility trader. You can use the VIX, VXN, VVIX, and P/C Ratio to warn you when a pullback is coming soon. You don't long the VIX unless you are very experienced with the ins and outs of what I mentioned. I don't long the VIX anymore because Credit Suisse delisted my precious TVIX (nicknamed Talia Vixen). She was an attractive, crazy lady who I end up coming back to for some reason.
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