$VIX SPIKES & 75% RETRACEMENTS GRAPHED FOR VISUALIZATION
Updated
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. WhenVIX 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 andVIX 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. WhenVIX 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 readingVIX, 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.
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. Note
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.tradingview.com/x/sP9RxVeT/.
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
Note
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 lastNote
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
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