More to come ....
Updated
We have been closely following the VIX in our former post regarding the SPY. There have been 3 trends we have been watching: The resistance created over the past year. the past two-ish years, and the one that has been around since 2016.
--Short term resistance was broken, but the overhead resistance from the interim trend then prevented further spiking. The key we were then looking for was the VIX to sell-off and find support on the previous trendline break. A test and hold, meant a further sell-off ensued. So, the last Friday fall was expected. The question became would it hold resistance again or breakout?
--It broke out....signaling the worse is yet to come. Much like the VIX did on the short term breakout, I'd expect some of the same on the interim term one. The VIX is currently overbought on the daily, and the SPY is oversold on the 4 hour. So a bounce of some kind is imminent. Don't be surprised if a quick drop to 320 happens first, but from there the key will be watching for the vix to sell back off to retest the break, and hold.
--Short term resistance was broken, but the overhead resistance from the interim trend then prevented further spiking. The key we were then looking for was the VIX to sell-off and find support on the previous trendline break. A test and hold, meant a further sell-off ensued. So, the last Friday fall was expected. The question became would it hold resistance again or breakout?
--It broke out....signaling the worse is yet to come. Much like the VIX did on the short term breakout, I'd expect some of the same on the interim term one. The VIX is currently overbought on the daily, and the SPY is oversold on the 4 hour. So a bounce of some kind is imminent. Don't be surprised if a quick drop to 320 happens first, but from there the key will be watching for the vix to sell back off to retest the break, and hold.
Note
Still oversold on the 4hr....
Still expecting a further "bounce" / consolidation faze before any further selling were to take place.
Looking more like a flat consolidation faze verse a bounce at the moment.
Note
Sentiment is a little worse than I expected I guess...No interim consolidation, just a straight shot down. Get close to some big support here....
The red line being the megaphone, which was always something that we expected had to be retested as support at some point. Then there is the 200 day right next to it. At this point, the markets will probably hit that before any significant move higher resumes.
But, the mango line has been in play for this entire cycle:
The long entry at 308 is looking really good. The risk//reward for going long at the mango line isn't too shabby either.
Note
If I went the charts correctly, the last time the VIX had four consecutive days of being oversold was October 2088. Today is the fourth day....Typically, the 200 dma is broken in intra-day trading when further selling to the downside occurs without a 4-5 day bounce first. SPY is currently set to open on a gap down below the 200 dma. Pending a strong bounce in the next hour of pre-market trading, SPY is set gap below the 200 dma.
In other words, today looks like a likely day where we see the "final panic gap down" , which gets followed up by an intra-day reversal to the upside.
---As always, just going over some things.Things could always be different this time.
Hypothetical set-up:
Note
Key support zone
Note
Still the bigger picture in mind is...The question just become whether or not there is a trend retest before it potentially gets there....
If SPY can't hold it's previous highs....that ugly drop could be very shortly
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