Exploding MOVE/VIX Ratio: A Major Warning SignHey everyone 👋
Guess what? This post was created by two TradingView users! @SquishTrade and I collaborated on this post.
We wanted to share our thoughts about the MOVE/VIX ratio, which has been exploding recently, and which may be presenting a warning about the future movement of the S&P 500 ( SPX ).
Before we begin, here's a bit more about the MOVE index:
The MOVE Bond Market Volatility Index measures the expected volatility of the U.S. Treasury bond market. It is calculated based on the prices of options contracts on Treasury bonds. The higher the price of these options, the higher the expected volatility of the market. The MOVE index is widely used by investors, traders, and analysts as a measure of risk in the bond market, as changes in market volatility can have a significant impact on the prices of bonds and other financial instruments.
The above image shows a 10-year U.S. Treasury bond issued in 1976.
Here's a bit more about the VIX volatility index:
The VIX is a measure of volatility in the stock market. More specifically, the VIX measures volatility by using weighted prices of SPX index options with near-term expiration dates. When the VIX volatility index was created by the Chicago Board Options Exchange (CBOE) in 1993, it was calculated using at-the-money (ATM) options. In 2003, the calculation was modified to include a much wider range of ATM and out-of-the-money (OTM) strikes with a non-zero bid. The only SPX options that are considered by the volatility index calculation are those whose expiry period lies within more than 23 days and less than 37 days.
The above image shows the highest VIX ever recorded at the close of a trading day. It occurred near the start of the COVID-19 pandemic shutdown.
Recently, @SquishTrade discovered that the ratio between the MOVE bond volatility index and the VIX volatility index has been rising along a trend line (as shown below).
Indeed, since 2021, the MOVE/VIX ratio has been exploding higher and is now approaching the highest level ever.
@SquishTrade identified that the daily chart of the MOVE/VIX ratio has shown a moderately strong positive correlation to moves in the S&P 500, this correlation appears to be statistically significant.
Citing the above chart, @SquishTrade further explains that:
The peaks in MOVE/VIX seem to correlate with peaks in SPX, especially since late 2021 (exceptions in yellow circles). This makes sense. When a rise in MOVE occurs, but VIX stays low, this raises the ratio. Of course, when VIX stays low, it's almost always because SPX price has risen or remains supported. Overall, higher MOVE and lower VIX suggest underlying problems in broader bond markets / financial system / economy AND that this is not being reflected in implied volatility (IV) for SPX. In other words, for a variety of reasons, some of which may have to do with volatility players, equity volatility shows that equities don't care yet.
When the VIX rises, the ratio falls. The interesting thing is that the peaks in MOVE/VIX correspond with the peaks in the SPX. The other interesting thing is the general trend up in MOVE/VIX and the corresponding trend down in SPX since late 2021.
So when MOVE/VIX peaks, it is as if rates markets are flashing red, and SPX is rallying like all is well. That process continues until a top in both SPX and MOVE/VIX occurs, at which time SPX gets the memo, VIX rises, and the MOVE/VIX and SPX fall together.
My response to @SquishTrade's above analysis is that: It is my belief that the explosive move higher in the MOVE/VIX ratio relates to the capital dislocation hypothesis, which I explain in further detail in my TradingView post below:
In short, the capital dislocation hypothesis is that there is far too much capital in the stock market (SPX) for bond yields to be as high as they are (and while GDP growth is also as low as it currently is). Similarly, S&P 500 volatility (VIX) is far too low for bond volatility (MOVE) to be as high as it is, as @SquishTrade alludes above.
Exeter's inverted pyramid (shown below) ranks financial assets according to safety, with the safest assets at the bottom of the inverted pyramid. Whenever an asset lower down on the inverted pyramid becomes volatile, riskier assets above it tend to experience some greater degree of volatility. This often occurs on a lagging basis since macroeconomic processes are not instantaneous.
Therefore, we can extrapolate that the extreme volatility of U.S. Treasury bonds will likely precede extreme volatility in riskier asset classes, including stocks. Consequently, the exploding MOVE/VIX ratio is likely a warning that the VIX may move much higher soon. Chart analysis of the VIX, as shown below, potentially supports this conclusion.
Bond volatility, as measured by the MOVE index, has likely increased due to the market's extreme uncertainty about the future of interest rates and monetary policy. This extreme uncertainty underpins the stagflation paradox: persistently high inflation pulls the central bank toward monetary tightening (higher bond yields) while liquidity issues and slowing economic growth pull the central bank toward monetary easing (lower bond yields), thus resulting in bond volatility. The explosion of bond volatility is likely a sign of impending stagflation, which may be severe. For more of my stagflation analysis, you can read the below post:
Certain futures markets, such as the Eurodollar futures market, which typically guides the Federal Reserve's monetary policy, have been experiencing historically high volatility, as shown below.
The above futures chart suggests that the uncertainty about future interest rates stems directly from ambivalent market participants. Since the Federal Reserve generally follows the market, if there is extreme uncertainty and ambivalence about the future of interest rates among market participants then the result will likely be a period of whipsawing monetary policy (whereby the Fed hikes, cuts, hikes, and cuts interest rates in rapid succession). In the quarters and years to come, we will likely see extreme monetary policy whipsaw as the Federal Reserve grapples with the dueling high inflation and slowing economic growth crises that characterize stagflation.
Be sure to follow @SquishTrade on TradingView, and let us know in the comments below if you would like us to collaborate on additional posts! If you're interested in collaborating with us, also let us know!
Important Disclaimer
Nothing in this post should be considered financial advice. Trading and investing always involve risks and one should carefully review all such risks before making a trade or investment decision. Do not buy or sell any security based on anything in this post. Please consult with a financial advisor before making any financial decisions. This post is for educational purposes only.
Volatilityindex
Why we’re watching the Bond/Equity Volatility
With the action-packed week of global central bank meetings for September now behind us, we believe it's an appropriate time to review where we stand. The current phase, in our view, can be aptly summarized by the words of Huw Pill, the Bank of England’s Chief Economist: a ‘Table Mountain’ scenario rather than a ‘Matterhorn.’ Recent announcements have positioned the Swiss National Bank, the Bank of England, and the Federal Reserve as adopting a pause stance. Meanwhile, the ECB suggests that it is in the final stages of its hiking program, and Sweden’s Riksbank has just executed its final hike. While we remain slightly skeptical that these hikes may indeed be the final ones, let's entertain this thought and examine what transpires during periods of a defined pause.
Defined pause periods raise alerts for us, as highlighted in our previous piece on US Equities. In that article, we pointed out the impact of a Fed pause, as it has often preceded periods of equity drawdowns. This pattern becomes even more evident when we consider other variables like shifts in the dollar and interest rates.
Looking at the S&P 500 index —in 2000 and 2006—where a clear pause was observed, significant equity drawdowns followed thereafter.
Furthermore, the 10-Year, 2-Year, and 3-Month yields have just reached their highest levels since October 2007, June 2007, and January 2001, respectively. These yields mark the highest nominal interest rates seen in decades across the interest rate curve.
More significantly, this shift has brought real yields back to positive levels, something investors haven't seen for a while, all while the yield curve inverts to unprecedented levels. All of these factors have spill-over effects on investors accustomed to decades of low real interest rates.
Another observation worth noting is that the ratio of Bond to Equity volatility has proven to be a reliable indicator for predicting the next market regime. For instance, during the 2008 period, a break in this ratio was followed by significant moves lower in the market.
A similar phenomenon was observed in 2019, where a sharp break in the ratio of MOVE to VIX preceded the market's next downturn. What captures our interest now is a recent, significant break in this ratio, reinforcing our bearish outlook on equities.
In terms of daily charts, the recent gap down places the index at a precarious juncture as it grapples with both a sharp break of the 100-day moving average and trend support. Compared to the last two instances when the index broke lower, the current RSI stands at even lower levels. Adding to this, only 18% of S&P 500 stocks currently trade above their 50-day moving average.
Given the breakdown in the MOVE/VIX ratio, the global pause in interest rate policy, and supporting technical indicators, we are inclined to maintain a bearish stance on US equities. We can express this view via a short position on the CME E-mini S&P 500 Futures at the current level of 4347, with the take profit at 3800 and stop at 4500. Each 0.25 point move in the E-MINI S&P500 index Futures is equal to $12.5. We can also express this same view with the CME Micro E-mini S&P 500 Index. With each 0.25 point move equating to $1.25, its smaller tick size compared to the standard contract offers greater flexibility in position-building or averaging your entries.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description.
Reference:
www.cmegroup.com
www.cmegroup.com
The VIX: A Measure of Market FearThe VIX, or Volatility Index, is a measure of the expected volatility of the S&P 500 index over the next 30 days. It is calculated using the prices of options on the S&P 500 index. A higher VIX indicates that market participants are expecting more volatility in the future, while a lower VIX indicates that they are expecting less volatility.
The VIX is an important tool for investors because it can help them understand how risky the stock market is. A high VIX indicates that the market is expected to be volatile, which means that there is a greater chance of large price swings. This can make investing more risky, but it can also create opportunities for profit.
The VIX is also correlated with the S&P 500 index. This means that the VIX tends to move in the opposite direction of the S&P 500. When the S&P 500 falls, the VIX tends to rise, and when the S&P 500 rises, the VIX tends to fall. This correlation is not perfect, but it is strong enough to be useful for investors.
The VIX can be used in a variety of ways by investors. Some investors use the VIX to assess the risk of their portfolios. Others use the VIX to trade volatility, either by buying or selling VIX futures contracts. Still others use the VIX to hedge against risk in other assets.
The VIX is a complex and volatile asset, but it can be a valuable tool for investors who understand how to use it.
Here are some additional things to keep in mind about the VIX:
The VIX is not a direct measure of the volatility of the stock market. It is a measure of the expected volatility, which means that it is based on the opinions of market participants.
The VIX can be affected by a variety of factors, including economic news, political events, and natural disasters.
The VIX is not always accurate. It can sometimes overshoot or undershoot the actual volatility of the stock market.
Despite its limitations, the VIX is a valuable tool for investors. It can help investors understand the risk of the stock market and make informed investment decisions.
I hope this post is helpful.
This analysis represents my thoughts at the date it is posted.
This analysis does not represent professional and/or financial advice.
You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other content found on this profile before making any decisions based on such information.
Opening gap not retraced yetOne thing we would like to point out is yesterday's opening gap in the Volatility S&P 500 Index. A failure of the price to fill the gap risks rekindling the volatility in the short-term future. As such, it is something we are paying attention to.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
🔥 The Calm Before the Storm: Bitcoin's Volatility AnalyzedIn our latest analysis, we explore Bitcoin's unfolding volatility patterns. Notably, the bottom indicator highlights a distinct drop in Bitcoin's 7-day volatility, as depicted by the green metric.
Historical data consistently suggests that such low volatility precedes significant market movement. While periods of low volatility can span weeks, they invariably culminate in a pronounced shift.
Previously, I discussed Bitcoin's volatility and predicted a potential downturn risk. My perspective remains unchanged. Given that September traditionally presents challenges for crypto performance, and considering the precedent set by pre-halving years exhibiting roughly 50% bullishness (a trend we observed at the year's start), there's a strong inclination toward upcoming bearish trends.
Although positive ETF news might temporarily boost the market, a surge in selling is anticipated in the near future.
If you wish to use this indicator yourself, check out this link below:
Which direction do you think that the market will go? Share in the comments 🙏
Volatility heads up given - watch this one!This is the VXX (VIX ETN) and can be used as an indicative heads up to the equity market volatility. We are now at a rather unique point where the rubber band has been stretched so far, and at a point where you can just feel the tremor of it about to snap…
The daily chart of the VXX has been falling over the months, and in recent weeks, there is a long term MACD divergence that has not been sorted. This happened as the equity markets pushed much further up. This week saw a quick retracement and the VXX acted accordingly. The thing here is that this time, the VolDiv indicator got aligned. With these two aligned and about to break up into bullish territory (above zero), it give good heads up that a volatility spike is about to happen. Concomitant to the equity indexes falling off the cliff.
It does not look like it will happen in the immediate term, but within weeks to come IMHO.
Low Volatility Clue to Upcoming Growth 📉🚀🔍 The Quiet Before the Surge: Imagine the market as a serene pond, not a ripple in sight. That's low volatility, my friend! But here's the juicy part: it's like the market is catching its breath before leaping into action.
🚀 Springboard to Momentum: Low volatility? Think of it as the trampoline for a potential price leap. The calm is like the calm before a concert – the band's tuning up, and the audience is in for a treat. In the crypto world, that treat might just be a price rally.
💡The Precursor to Uptrend: When the market's rocking low volatility, it's like a hush before the storm – a storm of bullish action, that is. Keep your eyes peeled because this serene moment often precedes an upward price movement.
🚴♂️Traders' Playground: Traders love these tranquil spells. They're like pit stops during a race, a chance to strategize and gear up for what's next. A little breather, a lot of potential.
So, what's the low-volatility takeaway? 🌌 It's not just a downtime; it's a heads-up for traders and investors. The calm might just be the quiet you need to brace yourself for a burst of excitement.
Stay curious, watch the charts, and get ready for the market's next groove! 📊🎉
❗See related ideas below❗
Follow + Like this post and leave a nice comment, it will allow me to move faster and make more useful content! 💚💚💚
🔥 Bitcoin Yearly Volatility New All-Time Lows: BIG Move Coming!If you enjoy this analysis, please give it a like and a follow.
Over the last few weeks I've made multiple analyses on Bitcoin incredibly low volatility and intra-day price movements. In this analysis I want to expand on those and look at BTC's yearly volatility (as opposed to the weekly).
The bottom, orange, indicator "BVOL" tells us that the YEARLY volatility of BTC has made a new all-time low. This means that, relatively, Bitcoin's intra-year price movement has never been lower than it has been now.
First of all, this is to be expected with Bitcoin becoming a larger, and more traded asset. You won't see the SP500 making +10% weeks very often, while it's till relatively common for Bitcoin. Second, volume has dried up as traders have left the space. To add on top of this, Bitcoin's price action has been simply terrible since April this year.
Low volatility periods are very often followed by high volatility periods. We can have this low price action for a long time, but it will always end with a bang: a big move in either direction.
Overview of Cryptocurrency Volatility - 1M, Jule, 2023.Analysis of the volatility index in Jule. Time interval - 1 month.
Currency - USDT or equivalent to BUSD .
The selection is carried out according to the lists of cryptocurrencies that are represented on the spot and futures markets, with a total of more than a hundred coins.
Top 15 Coins (Jule):
1. BINANCE:WLDUSDT WLD/usdt - 1444% (High&Low: 3426.67%)
2. BINANCE:ARKMUSDT ARKM/usdt - 917.80% (High&Low: 1680%)
3. BINANCE:XVGUSDT XVG/usdt - 98.85% (High&Low: 294.56%)
4. BINANCE:STMXUSDT STMX/usdt - 58.71% (High&Low: 295.75%)
5. BINANCE:MKRUSDT MKR/usdt - 47.53% (High&Low: 67.63%)
6. BINANCE:XRPUSDT XRP/usdt - 47.48% (High&Low: 101.59%)
7. BINANCE:XLMUSDT XLM/usdt - 35.50% (High&Low: 92.86%)
8. BINANCE:TOMOUSDT TOMO/usdt - 34.08% (High&Low: 77.35%)
9. BINANCE:KNCUSDT KNC/usdt - 29.03% (High&Low: 53.98%)
10. BINANCE:OGNUSDT OGN/usdt - 28.34% (High&Low: 89.23%)
11. BINANCE:COMBOUSDT COMBO/usdt - 26.50% (High&Low: 38.16%)
12. BINANCE:SOLUSDT SOL/usdt - 25.89% (High&Low: 75.49%)
13. BINANCE:CRVUSDT CRV/usdt - 25.49% (High&Low: 45.60%)
14. BINANCE:MAVUSDT MAV/usdt - 24.91% (High&Low: 68.04%)
15. BINANCE:UNIUSDT UNI/usdt - 23.87% (High&Low: 29.60%)
The coin showed the worst result: BINANCE:ENJUSDT ENJ/usdt - 0.1% (High&Low: 22.01%).
Full list of analyzed coins: www.tradingview.com
Analysis information for all coins: docs.google.com
Thanks for your attention!
Overview of Cryptocurrency Volatility - 1M, June, 2023.Analysis of the volatility index in June. Time interval - 1 month.
Currency - USDT or equivalent to BUSD .
The selection is carried out according to the lists of cryptocurrencies that are represented on the spot and futures markets, with a total of more than a hundred coins.
Top 15 Coins (June):
1. BINANCE:MAVUSDT MAV/usdt - 718.40% (High&Low: 3860%)
2. BINANCE:BCHUSDT BCH/usdt - 168.49% (High&Low: 210.68%)
3. BINANCE:XECUSDT XEC/usdt - 64.61% (High&Low: 93.72%)
4. BINANCE:COMPUSDT COMP/usdt - 55.80% (High&Low: 101.03%)
5. BINANCE:COMBOUSDT COMBO/usdt - 50.98% (High&Low: 73.35%)
6. BINANCE:BNXUSDT BNX/usdt - 46.54% (High&Low: 64.23%)
7. BINANCE:EDUUSDT EDU/usdt - 46.16% (High&Low: 53.69%)
8. BINANCE:LINAUSDT LINA/usdt - 40.68% (High&Low: 86%)
9. BINANCE:IDUSDT ID/usdt - 40.04% (High&Low: 49.63%)
10. BINANCE:HIGHUSDT HIGH/usdt - 37.64% (High&Low: 64.64%)
11. BINANCE:XVGUSDT XVG/usdt - 36.24% (High&Low: 124.60%)
12. BINANCE:AGLDUSDT AGLD/usdt - 32.28% (High&Low: 53.27%)
13. BINANCE:MKRUSDT MKR/usdt - 30.66% (High&Low: 54.87%)
14. BINANCE:ACHUSDT ACH/usdt - 30.55% (High&Low: 53.81%)
15. BINANCE:CFXUSDT CFX/usdt - 29.75% (High&Low: 43.97%)
The coin showed the worst result: BINANCE:ARBUSDT ARB/usdt - 0.28% (High&Low: 30.25%).
Full list of analyzed coins: www.tradingview.com
Analysis information for all coins: docs.google.com
Thanks for your attention!
Overview of Cryptocurrency Volatility - 1h, November, 2022.Analysis of the volatility index in November. Time interval - 1 hour.
Currency - USDT or equivalent to BUSD .
The selection is carried out according to the lists of cryptocurrencies that are represented on the spot and futures markets, with a total of more than a hundred coins.
Top 15 Coins (1 hour):
1. PHB /busd - 1413.67% (High&Low: 3119.4%)
2. MASK /usdt - 1386.55% (High&Low: 2940.2%)
3. BAND /usdt - 1266.71% (High&Low: 2605.56%)
4. AMB /busd - 1068.75% (High&Low: 2363.97%)
5. LEVER /busd - 1061.4% (High&Low: 2339.31%)
6. PEOPLE /usdt - 1034.08% (High&Low: 2146.72%)
7. DYDX /usdt - 1008.12% (High&Low: 2113.56%)
8. GTC /usdt - 1006.37% (High&Low: 2069.63%)
9. SFP /usdt - 959.68% (High&Low: 2125.98%)
10. CHZ /usdt - 946.32% (High&Low: 1971.69%)
11. SOL /usdt - 915.31% (High&Low: 1899.99%)
12. LIT /usdt - 874% (High&Low: 1793.31%)
13. DODO /busd - 869.22% (High&Low: 1759.8%)
14. AR /usdt - 857.38% (High&Low: 1782.73%)
15. SUSHI /usdt - 855.32% (High&Low: 1774.11%)
The coin showed the worst result: BTC /usdt - 287.52% (High&Low: 644.26%)
Thanks for your attention!
Overview of Cryptocurrency Volatility - 1D, November, 2022.Analysis of the volatility index in November. Time interval - 1 day.
Currency - USDT or equivalent to BUSD .
The selection is carried out according to the lists of cryptocurrencies that are represented on the spot and futures markets, with a total of more than a hundred coins.
Top 15 Coins (1 day):
1. MASK /usdt - 361.63% (High&Low: 696.13%)
2. BAND /usdt - 337.16% (High&Low: 715.42%)
3. LEVER /busd - 279.01% (High&Low: 624.26%)
4. PHB /busd - 265.87% (High&Low: 816.13%)
5. SFP /usdt - 260% (High&Low: 543.59%)
6. DYDX /usdt - 228.3% (High&Low: 473.58%)
7. SOL /usdt - 224.96% (High&Low: 403.6%)
8. GTC /usdt - 221.38% (High&Low: 481.87%)
9. CHZ /usdt - 213.19% (High&Low: 415.79%)
10. CELO /usdt - 205.89% (High&Low: 380.34%)
11. C98 /usdt - 203.71% (High&Low: 405.97%)
12. REN /usdt - 203.28% (High&Low: 452.57%)
13. AMB /busd - 202.06% (High&Low: 553.96%)
14. APE /usdt - 201.33% (High&Low: 380.98%)
15. CRV /usdt - 201.2% (High&Low: 396.61%)
The coin showed the worst result: CTK /usdt - 69.79% (High&Low: 170.42%).
Full list of analyzed coins: www.tradingview.com
Analysis information for all coins: docs.google.com
Thanks for your attention!
Overview of Cryptocurrency Volatility - 1M, November, 2022.Analysis of the volatility index in November. Time interval - 1 month.
Currency - USDT or equivalent to BUSD .
The selection is carried out according to the lists of cryptocurrencies that are represented on the spot and futures markets, with a total of more than a hundred coins.
Top 15 Coins (November):
1. MASK /usdt - 73,79% (High&Low: 168,02%)
2. BAND /usdt - 65,23% (High&Low: 218,19%)
3. SOL /usdt - 56,52% (High&Low: 85,51%)
4. NEAR /usdt - 44,51% (High&Low: 64,77%)
5. LTC /usdt - 43,87% (High&Low: 65,54%)
6. REEF /usdt - 41,64% (High&Low: 85,66%)
7. APT /usdt - 39,85% (High&Low: 61,5%)
8. HNT /busd - 39,5% (High&Low: 61,75%)
9. KAVA /usdt - 39,08% (High&Low: 50%)
10. MANA /usdt - 38,64% (High&Low: 57,78%)
11. GALA /usdt - 38,23% (High&Low: 48,02%)
12. ANC /busd - 35% (High&Low: 57,89%)
13. LUNA /usdt - 33,8% (High&Low: 59,45%)
14. FLOW /usdt - 32,42% (High&Low: 59,34%)
15. SAND /usdt - 32,17% (High&Low: 53,61%)
The coin showed the worst result: BCH /usdt - 1.3% (High&Low: 33.91%).
Full list of analyzed coins: www.tradingview.com
Analysis information for all coins: docs.google.com
Thanks for your attention!
SVXY a volatility ETF play LONGSVXY is the ETF shorting the VIXX ( and UVXY) which pumped hard this past trading
session. It goes up when volatility goes down and vice-vera. VIXX is expected to
drop after the trama in the market starting at 1PM when the Treasuries auctions
were duds with little transactions occurring and the financial data reported in
the late morning. SVXY dropped to its near term lows as the VIXX too off.
SVXY bounced above the long term anchored mean black VWAP line which provides
a logical stop loss at 85.65. The relative trend indicator shows the dip and early
recovery while the RS indicator shows low and high time frame lines bottoming
and reversing with the low blue line above the higher black time frame line.
I see this as a long trade setup targeting the pivot highs in the near left of the
price trend or about 90.5, A similar trade would be to short UVXY in a trend down.
Is it finally time for a vol event?I know everyone thinks volatility is dead because it largely hasn't moved for the past year, however, I think that could be changing in the near future.
The market has largely felt similar to how it did before the covid drop. People ignoring the risks right in front of them and blindly thinking the market will continue up.
The chart is telling me it might be time for volatility to pick up. Maybe Thursday or Friday this week?
If we do get a vol event, I think it'll be a sharp one, with ~100% rise likely up into the $40 resistances. Let's see if it plays out.
I bought a lot of calls just incase it happens.
VIX - THE RECESSION INEVITABLE?The "VIX = Volatility Index S&P500" has predicted us in the last 3 decades, quite reliable possible "extreme movements".
= Why in the next 2-years such an event could occur, we will take a closer look in the following article.
WHAT IS THE VOLATILITY INDEX S&P500
= Expresses the expected range of fluctuation of the U.S. stock index S&P 500.
= To determine volatility, it measures the distribution of options that run on these stocks.
TABLE OF CONTENTS
- 1st part = VIX
- 2nd part = VIX PROPERTIES + USE
- 3rd part = CURRENT SITUATION
- 4th part = CONCLUSION
PART ONE
"PAST."
If you compare the past of the "VIX" with the S&P500, you will notice that the - 36.47 - mark played / continues to play a very important role.
Every time the "VIX" exceeded the - 36.47 -, there was extreme volatility in the S&P500 and other asset classes.
PAST EXTREME MOVEMENTS .
> 01.10.1998
> 01.10.2008
> 03/02/2020 (near crash)
Why the VIX has such a big impact on the S&P500 and how we can actively factor this into our trading follows in part two.
PART TWO
"VIX CHARACTERISTICS"
The "VIX" provides information on how serious fluctuations could be based on the option volume.
= "VIX" goes up -> Statistically more likely that the S&P500 will fall.
= "VIX" goes down -> Probably that the S&P500 gains slightly.
Additionally, it can be noted that as soon as the "VIX" gets close to - 36.47 - many market participants take profits.
WHY IS THIS SO?
The market has already reached a "VERY VOLATILE point".
> Price - FALLS - fast = SHORT positions will take profits > BUY
> Price - RISES - fast = LONG positions will take profits > SELL
CONSIDERATION OF "VIX" IN TRADING?
"VIX" = Negative correlation to the S&P500 = "VIX" goes up = S&P500 goes down.
= This negative correlation occurs because institutional investors use options to hedge against high volatility (hedge against stocks).
RISING "VIX"
= less liquidity in the stock markets + position reduction = stocks fall
FALLING "VIX"
= More liquidity in the equity markets + position building = equities rise
PART THREE
"CURRENT SITUATION"
> The "CORONA crash" could not make a new HH in the "VIX", which is why this could still be pending at the current view.
= 2020 the market "fell" "35.41%" in the SPX
= 2008 the market "fell" "57.69%" in the SPX
With the technical analysis, I come with the current constellation, to a higher "VIX" value than the 2008 reached.
= which would mean a bigger sell-off.
> Since 2018, we have been testing a "falling resistance line."
= Similar resistance lines resulted in the past when broken, with significant volatility + movement in the S&P500 (= traditional markets).
= The current resistance line has been respected several times, resulting in reactions.
> The "rising resistance line" since 1990 + "the arc" + "the macroeconomic environment", suggest another "VIX" breakout .
> The rising resistance line was tested at the two "extremes" - 01.10.1998 + 01.10.2008 - on.
= this meant, both times, the temporary end of the extreme volatility
= in 2020 we could not reach it, which additionally suggests another "breakout".
> If the price trend continues to consider the direction of the arc, then this leads us to a much higher target than 2008 / ever before.
PART FOUR
CONCLUSION
"If the VIX is high, then it's time to buy, if the VIX is slow, it's time to go"
> Regardless of the outcome of the analysis, anyone who hasn't used the VIX before should now have gained a little insight.
The future looks anything but bright for now, however we can use this time to learn and grow .
The VIX could delay the final decision for another 2-years, which is certainly to the advantage of each of us.
= Despite this still "long" period of time, a decision will be made in the future.
> Let's discuss it in the comments and exchange our perspectives, your view on the whole thing would interest me "burning".
If this idea and explanation has added value to you, I would greatly appreciate a review of it.
Thank you and happy trading!
The S&P Volatility Index is Set to Spike up to over $50There is a Bullish Gartley visible on the Log Scale chart that is currently giving us a Potential Double Bottom at the 0.786 PCZ with Bullish Divergence on both the RSI and MACD and if it plays out, I think it could spike all the way up to around $55 before coming back down and continuing to the historical lows.
VIX 2008 Repeat VolatilitySee the illustration traced from the 2008 volatility spike leading into the GFC. As it can be seen visually, the similarities are present. The news cycle appears to be dominated by a similar set of events, including the collapse of the 2020's version of Bernie Madoff, SBF. I doubt the volatility will play out in a continuous fashion, as the Fed as new tools to their disposal. I expect some difference in the delay or outcome, but not a significant one.