Category Archives: VIX

Quick Look At The VIX

Today the stock markets took a big hit, and the VIX soared. The VIX is in a vertical position right now, which usually precedes a correction or a reversal. Once we check the top trend line on the daily VIX chart, we can see that the VIX is pointing to the $14-$15 price range where strong resistance can come from.

We also have two open gaps well below todays VIX prices. It doesn’t necessarily mean that these two gaps, have to get filled on the next trip down, but there is a good chance that the $10.20 gap could get filled.  Any short small correction could happen, then this bullish phase will develop another leg up.

The commercials have had net long positions for a long time while those speculators have been betting on much lower VIX lows.  I’m sure you will read other analysts that report the trader’s positions, but they always tell you what the speculators are doing. The commercials were on the right side while the speculators got themselves into a bear trap! Following a group of traders that consistently trap themselves is not exactly my idea of the smart thing to do.

When the commercials become net short again, then I can see a big reversal with the VIX.

VIX Intraday Crash Update

The VIX crashed pretty good at the start of 2018. We are also at a 2 month long base,  just below that $9 price level. A record high for stocks and record lows for the VIX does not bode well for 2018. Analysts will twist the VIX results to justify the continuation of the bull market, giving even more incentive to stay long in these stock markets. Many question how much higher this market can go, but in reality they should be spending their time in figuring out how low these markets will eventually go.

The contrarians can scream off the top of a mountain that this stock market is expensive, but we know that the majority have never been listening in the first place.

At this recent VIX bottom the charts look like the algorithms are back at it again as the patterns are very tight and near vertical up and down.

The Mini SP500 soared to new record highs this morning as well, topping the 2728 price level. Another VIX bear trap and stock bull traps seem to be setting up at this time.

December, 31, 2017 Year End VIX Update

A year end look at the VIX can give us some insight as to what is going to happen in the next 3-4 years. The VIX peak on your top left matches what I have is the Intermediate degree wave 4 top. What followed this VIX top was a long drawn out decline, with many counter rallies, that all ended with  vertical spikes. A person would be hard pressed to find any clean set of impulse waves during this decline,  except for very small degree level sequences.

What it boils down to is that anything with the VIX are all diagonal wave structures. Our “Little Blue Book” only shows what they call an “ending diagonal”. The fact is, these so called, “Ending Diagonal 5th Waves”,  can and do extend dramatically, far beyond what they ever show us in the EWP book. In the book they also show us pretty idealized charts, all subdividing into nice even wave structures. The simple truth is that you will “Never” find these pretty wave structures, because nothing in the markets is ever even.

What the VIX really shows us is a declining market with a potential wedge like pattern. For the last 3-4  months the VIX is setting up a massive base just below the $9 price level.  The two previous upward spikes came to a screeching halt, at the top trend line, before heading south again.  This base is now the lowest since the last major low in December of 1993, 24 years ago.

With the bottom base line being flat, the VIX bears are getting squeezed into a box. These boxes or uneven triangles can produce wild upward thrusts, that shock  us when they do happen. We will get a surprise if we choose to ignore these VIX bear trap situations.

The first peak we have to beat is the $21 price level, and then the $30 price level. Technically speaking, the VIX should exceed or retrace this entire VIX bear market, so hang onto your hats folks, as the VIX winds are going to start blowing to the northeast, sending stock markets southeast.

December, 13, 2017: VIX Intraday Crash Review

In early December the VIX spiked and then reversed and crashed. Vertical moves like this can never be maintained as they are also the fastest moves we can have.  $14.60 seems to be the price to beat and if my zigzag decline is correct,  then this $14.60 price level will get retraced.  We have an open gap just dead ahead so that could provide some resistance again, but at the same time could supply support, for a much stronger VIX move. 

The markets are at euphoric bubble highs with the VIX at record lows.  The VIX is where the real fear is shown with charts, and at this time investors show no real fear, just yet.   The fear will come back into the markets as bullish record highs always traps the majority. Thinking that good times are still to come,  always means  the end of a bull market, not the beginning of one.  

The VIX Intraday Spike Review

With this bar type setting the VIX produced a sharp spike to the downside. I like to see this happen towards the end of a long decline, but this spike was computer generated as it corresponded with Black Friday as well.  The spike back up, still has a small gap in it which should still get closed off.

This spike does “not” show up when I switch to a line type of a chart. Technically speaking the VIX would still have to drop to the $9.00 price level before all the gaps are closed off.

There are a few gaps still open well above todays prices so these open gaps work like a magnet, drawing prices to them.

That $8.60 bottom represents a huge VIX bear trap, which is the opposite to the SP500 bull trap!

Mini SP500 New World Record High!

Any bearish wave count I had, didn’t last very long. From the November bottom and  then followed by a 4th wave crash, created an overlapping pattern that technically would not be an impulse. In this case I will use it for a short period of time and see if a few more wild moves, turns this last run to new highs, into a diagonal wave.  The Nasdaq broke the diagonal pattern and produced a nice impulse so far. 

Old record highs have been left in the dust on most of the key indices that I follow, but we have to keep an open mind that we could be topping at another wave 3 peak. At these intraday levels, the markets are moving violently in both directions. To keep the bears piss off, this market could wobble around like this for a long, or even last out the entire year!  

After every record high, the markets will at least produce another correction, but we have to wait and see how deep any correction will go. 

Markets love even numbers so the 2600 price level would fit the bill perfectly.  What is not so obvious is that 2584 is an even Fibonacci number and if we count backwards, a 61% decline from 2584 will get us the next even Fibonacci  number of 1597. (1600) Even that number barely comes close to the previous 4th wave of one lesser degree, so a Cycle degree correction would have to fall much deeper. Any 987 (1000) price level would certainly fulfil part of the Cycle degree retracement requirement, as it would also retrace to 2011 market lows.  

The VIX has also crashed, and is getting very close to closing off the lowest price gap. The VIX doesn’t have to close this gap, it just would be nice to see it closed off before the VIX cranks up again.

VIX Intraday Gap Review.

The VIX cash contract has been heading down again, with a certain urgency to it.   Once we have a good look we can see that there are a few gaps that can throw a monkey wrench into the bullish and bearish scenarios of the VIX.   The first gap down at the bottom is still open, while we also have two gaps still open above present prices. Which set of open gaps is going to get closed off first? 

We can see a huge single spike to the upside, which can remain as the spike to beat, but it may get matched with an equally long spike to the downside.  I would love to see the opening gap in November get closed off, before the then next rally of fear,  starts to take off again.  Even if it doesn’t get closed off  we could get a H&S type setup as well. 

We also have a big open gap at the $23 price level so long term, any bullish run with the VIX, means a bearish run in stocks. 

VIX Intraday Crash Review

The VIX shows how violently it can move in both directions. It may travel to new record lows, but it is best to keep alternate bottoms just in case no new lows develop.  It also shows has fast the VIX can drop once a vertical spike has developed. On the larger scale the VIX spiked in late 2008 well before the stock market hit bottom in early 2009.   Steven Jon Kaplan called the end of the VIX bull market in late 2008, and he was right on the money. 

There is a small gap that opened around the 11.30 price level, so we know that a VIX bounce is coming again. 

VIX Intraday Bullish Phase Update

The VIX has been reacting like it should, which is a visual representation of fear in the market place. Many don’t care about the VIX  as they think the lower it goes the higher the bull market will go.  It also means that more and more investors were caught in a VIX bear trap.  All gaps below have been closed off, and one big gap in early September has now been closed off as well.   Since today was a very steep rally we should expect a correction, but not break new record lows again. 

VIX Intraday Review: Gaps Closed!

The bullish move of the VIX in October has now reversed, and looks like it may still go lower. Any inverted zigzag can completely retrace itself, except if it’s starting a set of 5 diagonal bullish waves.  Stocks are starting to correct again as I post, so this could give the VIX a little kick. We need a big bullish move with the VIX, to give investors a wake up call.  Of course most investors don’t care about any VIX, as all they care about is that markets keep going up. 

The commercials are still net long, so until those positions reverse, the threat of the VIX eventually heading back up is real. The big open gap we did have, has now been closed, so any gap to the downside would be a welcome sign.  Even a spike to a new record low would also be very bullish for the VIX. 

Mini SP500 Intraday Crash Update With VIX Commentary

Finally, The markets have reacted to the October, 19, 1987 stock market crash. It’s not any yearly anniversary date that the markets might react to,  but it’s the 30 year anniversary date that is the important time period. 

We do need more evidence that this decline has more downside legs to go, as any initial reaction can be still part of the bullish cycle. It is important that I find the last bullish wave otherwise, any wave count will have little meaning. Since the initial decline was rather steep, we could be looking at the start of,  diagonal wave structure as well. 

The spike to the upside is not a good bullish signal, but the markets are still struggling trying to head back up. Any analyst can give us support price forecasts, but when they do, they think they are just in another correction. The only real support we will find is the final one of a bear market low, as all others will just be temporary stops. 

That’s not going to happen anytime soon, if a potential Cycle degree peak has just completed. I’m looking for the top that will hold, as these record breaking highs may have come to an end.  Until this market is firmly controlled by bears, the risk of another bull attack are always present. 

The VIX has also soared, but created a few open gaps as it surged.

This VIX cash chart is very different from any November or December contracts. So far we have the potential for a zigzag to be completed, but that can always be the start of a diagonal set of waves as well.

VIX Intraday Crash Update.

The big open gap has been closed off and the VIX continues to head back down.  We could end up with a big double bottom and a H&S type of a setup. 

In the next two weeks we could run into some volatility with the 1987 stock market crash anniversary date next week.  Most trading was done in the pits at that time and the system got overwhelmed with sell orders. There are many more safeguards in the markets today, where they will halt trading first. 

The VIX does not have to create a new record low, but we can’t rule out anything in the short term.

VIX Intraday Rally Review

The VIX has been on a bit of a rally, but a wide open gap formed on the way up. I call this more like a Scalene triangle with an open end. Pattern wise it could be a diagonal 5th wave, but if this is the case, then the VIX should see yet another record low.  I would love to see this gap closed before the VIX pushes higher, but there is never any guarantee that this bottom gap will get close anytime soon. 

There is one big open gap above present prices, which will get closed, but it also could produce unexpected resistance. In early October there were many gaps that opened up,  which now have been closed. Even when they are already closed off, they can supply a strong support price range. 

The VIX has been rolling around record lows just like stocks have been rolling around record highs, so in that respect there is good inverse synchronicity. 

VIX Intraday Update: The Attack Of The Algorithms

Even with the VIX we see that algorithms were in control at one time, but it is starting to look like the human VIX traders  are starting to break free again. There is no real way of proving that these tight wave formations are computer generated, but no human or groups of humans can trade this fast and within a very tight price range. 

The VIX did drop down a bit lower to the $9.11 price level before it violently moved back to the upside. All bottom gaps are now filled with two gaps open well above present prices. The COT reports are not updated until the end of the trading day, so I quickly scan them to look for ratios that are out of wack or very distorted. My bet is that Commercials added long contracts this week while the speculators  added to their short positions.  Both groups can’t win as one group would be in a bear trap and the other would be a bull trap. 

As much as this start to a bullish phase can turn out to be nothing, as stocks may yet prove to still have life in them. 

VIX Intraday Gaps Update.

The VIX reacted this morning, but at the same time left a couple of huge open gaps that eventually must get closed off. I would like to see them get closed off sooner than later, as this is pretty early in the game to allow these gaps to remain open.  The 9.30 price level is also another double bottom record low going back to 1993.  Since the 1993 bottom we have three big VIX bottoms around the $10 price level, so this makes for a potential strong base.

A 24 year tripple bottom is pretty bullish for the VIX in my books, but that doesn’t mean a major reversal is due today. Longer term I’m bullish on the VIX, but with gaps showing up and VIX bullish run can get delayed.

VIX Intraday Record Low Update

This morning the VIX created another low after which the VIX started to move up again. End of the month and the end of another quarter shows how complacent investors really are. When the stock bulls are so complacent, then the attack of the stock bears is not far away. This will inject fear back into the markets again.  There is a big gap open above present VIX price levels, works like a magnet attracting  prices to the gap. 

At a minimum it would be nice for the gap to get closed off, but a new gap on the way up can reverse the VIX just as fast. At $12.60 we have several resistance levels that the VIX would also have to contend with.  October can be one of the most volatile months out of the year, with the 30 year anniversary date of the 1987 stock market crash due as well.   

Even though the markets have been pushing to new record highs, I have to remain bearish on stocks until the public gets very bearish on stocks again. 

VIX Intraday Update

The VIX has been grinding downward for most of September, but it has made another turning just yesterday. How far that will take us is still a guess, but that big open gap may give us a short term resistance price level.  Another price level gap is at $23, but we should see several corrections before the VIX ever gets to $23. There is lots of room for the VIX to move up which means there is lots of room for stocks to move down.

Since last week the VIX COT report with commercial traders positions is still on the side of the bulls. It will take a long time for this scenario to reverse, but when it does, then a strong stock counter rally would ensue.

Mini SP500 Another Intraday Record High Bull Trap!

Another new world record high with the SP500. All sorts of records have been broken, but does it really mean anything? Is it different this time?   Even Warren Buffett is about as bullish as I have ever seen him, as he thinks the DJIA will hit a million in 100 years. 

This SP500 chart also had a 5th wave extension, even with a small ending diagonal in Submicro degree. I would have to use Miniscule degree level to count out the very top of this chart. The SP500 also created a small double top before it backed off. Again, we need an obvious move down to confirm a bearish mood is going to happen. In the long run I’m not preaching the doom and gloom that many just love to spew out.  We should get a substantial correction, which the majority will call a bear market.  Trillions of dollars will evaporate into thin air before our very eyes, and those that once felt rich due to the wealth effect,  will end up seeing wealth disappear.  This is nothing new as it has happened two times before, just since 2000. 

We are pushing over an 8 year long bull market, which they say has never happened before. I think it has from about 1942 to the 1960s. What about from after the 1987 crash to the 2000 peak, which was a 13 year bullish phase. Also  from the 1975 bottom to the 2000 top was a 25 year run. 

This morning the VIX hit a low of $9.83 with the big gap closed up. A gap is still open above present prices,  so this gap works like a magnetic draw for prices.

In the end Cycle degree wave 3 is looking for a long term position that it can call home,  without fear of being evicted. 

Trying to find a major top for this market has been a struggle, but that is due to the fact that we are also higher in degrees than the previous two peaks of 2000 and 2007.   When SC degree wave 3 comes in the future, it will be much harder to get that peak as well. 

Intraday VIX Crash Update.

Gaps have opened up many times since the August peak, but have been mostly closed off. Two big gaps are remaining that I would like to see get closed, with the bottom gap being the first to close,  followed by closing off the $12 gap. Investors are having a tough time becoming completely complacent. Any bad news in this stage of the game,  can send investors into a mini panic. 

A worst case scenario could send the VIX to new record lows, as the August decline could work as a set of declining diagonal waves. Any new low in the VIX, could drop like a rock or the speed of a flash crash, before it starts to crank up again. 

Up near the $23 price level, we still have a partially open gap, which makes for a great price target in the future. Commercials are heavy net long, with a 2.5:1 ratio, while the speculators are net short with a 1.68:1 ratio. Between the two groups somebody is wrong, and my bet is not on the speculators being right. They are flogging a dead horse, or should I say “flogging a dead bear”,  thinking that the VIX still has a long way to go down. 

VIX Intraday Gyrations Update

One thing we will always get are wild swings in both directions, which forces many of the simple impulse waves to overlap at critical points. The only way we have a chance to wave count the VIX, is to make sure we count the waves all as diagonal waves with only small runs of simple impulse waves. VIX is one world where diagonal waves rule with no exceptions.

Silver is another one of those diagonal asset classes which has persisted since the 1993 silver bottom. The above chart looks like another zigzag is forming, but a bit more downside can still happen. The VIX can hit $10 which takes us close to the previous bullish phase bottom. 

My starting Minute degree level may be a bit too high, but this can be adjusted on the fly if need be. In this case we should not see a new record low before the VIX cranks up again. 

Next Thursday will be the end of the month and several jobs reports will also come out by Friday. This could make for some wild moves so we should always keep that in mind. 

There is one small open gap above todays prices, so this will be the first price target that should get hit again. Many analysts got a real thrill when the VIX jumped 30% in one day, but that may not happen again for some time. Maybe it will jump 50-60% instead.  😉   Of course that may also be wishful thinking on my part. 

We have one small open gap at the $23 price level so that would be the next big price target I would like to see get hit! 

This may happen this year or even closer to the 1987, 30 year anniversary date.  Years ending with a 7 have been disasters for the stock markets in the past, so this year could also bring us some surprising results. 

Mini DJIA Intraday Crash Update.

So far the August 8th peak has retained its position as the counter rally threatened to push to new record highs. The rally started like a 5 wave sequence, but then the markets proved that it was not.   The DJIA has now completely retraced the August rally and it should continue.   This time I started with a zigzag in Subminuette degree which will get bigger over time. 

When we get closer to any Minor degree wave 1 then it will be important to adjust. We really don’t know what we are going to get but a big flat is at the top of my list. It would be sic if any Cycle degree flat turns into a running flat or even a regular flat. 

An expanded flat is not ruled out, but it should be the “B” wave in Primary degree that can poke its peak to new record highs. 

My Cycle degree wave 1-2 (1938 1942) was a zigzag so I don’t want to see another Cycle degree zigzag. We are going to hear all sorts of bearish news come out as the market keeps declining. We can flip a coin which bearish story may dominate, but the majority will never see it coming. 

The writing has been on the wall for sometime already, and it is only the majority that figure that this market has no end. 

It is still early in the game as weekly and monthly charts have barely moved. Any higher degree correction should get us below the November, 2016 price, after which we may have the formation of a better defined pattern. 

The VIX is also hovering around the $15.50 price level, which closed one of the biggest gaps still open. As usual, new trend swings can raise havoc with extreme swings in both directions, but most of all we want to see the August, 8th hold. 

VIX Intraday Rally Update

It seems that the VIX bear trap has now come and gone, so the next thing we would have to look for is a VIX bull trap. The decline sure looked like an impulse which means that a potential “B” wave VIX bull trap can still happen. All gaps below have been closed, with one big gap only about 50 cents away from being filled at $15.50.  A fake “B” wave run could send the VIX right back down, even to the point that a new record low can be achieved.

Stocks would have to make a violent comeback for the VIX bearish scenario to play out.

Wall Street’s ‘fear gauge’–the VIX–jumps 24% amid tumbling Dow, Barcelona terror attack – MarketWatch

There are plenty of fundamental reasons that the majority of analysts uses to justify the market decline, with most of them just “parroting” another analyst’s opinion. Fundamentals which analysts get from the news is a lagging indicator at best. They ignore the fact that the markets have seen record bullish highs, which has created an extreme overbought situation. 

Technically speaking, eventually the VIX should match or surpass the 2008 peak of the VIX. It may take 3-4 years to get there, which still seems a long way off.

When we start getting open gaps as the VIX soars, then we have to be aware that the VIX can crash right back down and close a few of these potential gaps. 

Quick VIX Bearish Decline Review

We had a great little rally with the VIX, followed by what sure looks like a near perfect five wave impulse. This could be a bear trap all the same, if another small zigzag decline develops.  That would allow the perfect decline to fit into a zigzag and produce an earlier bottom.  During what I have as a 4th wave,  2 gaps opened up, but now both gaps have been closed off.

 One big gap above remains open which makes a bullish run still very likely. It may take its sweet time to close that top gap, but it will get closed. The $17.25 price level will now be the  next new target for the VIX to retrace,  

VIX Intraday Crash Update

Late last month the VIX bottomed and then proceeded with a violent move to the upside. Violent moves’ like this are commonplace with the VIX. The VIX  world is the world of diagonal waves. If you want lots of practice counting diagonal waves, then the VIX is one place you will get  your belly full of choppy waves.   Silver is another asset class where diagonal waves seem to rule. 

The bottom trend line shows a potential higher low, which is the general description of a bull market. The last thing we  want is a new record low, as the indices would then have to give us a new  record high as well.  The $11.50 price is where a small open gap sits, but a big gap opened up on the way down.

I’m very confident that the big open gap will get closed off, if this present decline contains another zigzag. I show a zigzag decline which should turn, but we have to keep our options open just the same. This is very early in any VIX bullish move. as much more should come in the coming weeks and months. 

Gundlach is set to make a killing as market ‘fear gauge’ soars to Election Day high – MarketWatch

Gundlach seems to know how to play the VIX as it can be traded as a futures contract. It would be a massive understatement if he does not have the staying power, to wait for a few more legs up in the VIX. 

VIX Bull Run Rallies To $17

From a bear trap, to a mini bull trap all in a few short days. The last little gap from the bottom up, is close to the horizontal line. The move up in the VIX was dramatic and near vertical. It is impossible for investors to maintain this level of fear, because if they did, sooner or latter the guys with white coats will have to subscribe some drugs to calm investors down. 

In the end, if the bigger VIX bullish phase has started, then the VIX should not crash to new record lows again for a long time. 

Of course they always have to find a reason for any market move, so blaming President Trump for the decline in stocks is the natural thing to do. 

The ideal move would send the VIX much higher, as we do have a hidden gap at the $27 price level.  Any gap always has a 90% chance of getting filled, but how long it can take to fill any open gaps could take many years. 

VIX, Waking Up From the Dead!

All the stock bulls have been jumping up and down celebrating the low VIX. As long as the VIX stayed below $10 you were safe in the stock market.  The contrarians use the VIX to show us how complacent investors are, as they know that when investors are at their maximum complacency, they know that markets will reverse. 

How big or at what price level any VIX can run to can be a bit of a crapshoot, but pure vertical runs can never be maintained for long periods of time.   I have a gap at the $23 price level, which is sort of closed, but can still determine turning points. 

I think there is more upside in the VIX, and when the majority starts to scream “Bear market” they could already be so worn out living in stock market fear, that it will reverse. No trend lasts forever and it is especially true in the VIX. 

This could still take a long time to play out, but first the VIX must smash through that top trend line. 

VIX Intraday Rally Review: Killing The VIX Bear!

Applying a wave count to the VIX may be a futile effort, but it is a way to communicate any potential move, as long as we understand that diagonal wave structures are the main wave types in anything related to the VIX.  

Any VIX move to the upside shows that fears about the stock market is rising. There are also spikes in the VIX that don’t show up when we switch to line type, so we have to ignore that single plunge below $9.  

The starting degree level may be too large, but that is not an issue when at this time.  It must be reviewed once this all starts to advance in a more obvious move that the mainstream starts to report on. In the short term,  I wouldn’t like to see this VIX hit another record low, but would rather see a new record high. 

There have been no gaps that opened up,  so that is a good thing at this time. Tracking any open gaps that may develop is very important as gaps supply potential turning points.  We do have a gap at about the $23 price level, so longer term this could provide some resistance. 

Waking up the VIX bulls is the same thing as waking up the stock market bears, so if you choose to ignore the warnings, the stock bulls may find themselves sliced, diced and cooking on the barbecue this summer.

 A third of millennials think now is the time to jump into the market – MarketWatch

When I read the link above it tells me that this age bracket has learned nothing from history, and when we ignore history we are certainly doomed to repeat it.  Don’t worry as all generations have made that same mistake over and over, and no amount of screaming  doom and gloom scenarios will change that. Getting into a market before solar cycle #25 has started is a recipe for disaster.

VIX Intraday Bear Trap Review

Yesterday the VIX created a wild move to the downside just above the $9.04 price level. This has a very good chance of being a false spike as it does not show in a line type chart.  High speed computer trading or algorithms running amok are the main source of these erroneous  spikes. No human can react this fast to produce some of these spikes.

What looks like a great start to an impulse, but diagonal waves can change that idea very fast. All the same we have a great looking spike, and we need to see the VIX keep right on going if the bigger bearish move is here. No gaps opened up by this move to the upside,  so I consider that a good thing at least in the short term. 

DJIA, 1970-2017 Primary Degree Elliott Wave Count Review

I started with a bigger time chart of the VIX and have arrows pointing to many of the peaks where important turnings have occurred. Many times, turnings start to show well before the crowd realizes it, especially when solar cycle #23 ended in late 2008.  When one solar cycle ends the next one starts, so by early 2009, solar cycle #24 had already turned the corner.

 All stock markets that I cover, also found their bottoms in early 2009, after which they started a massive bull market. This was inversely reflected in the VIX as it started to crash.

I couldn’t resist drawing in the wedge as they can forecast a potential reversal that will surprise many. Also, the stock  market bull run would keep right on going, if the VIX is not at record lows. 

The last weeks COT report also confirmed, that the commercial traders are net long with their VIX bullish positions by a margin well over 2-1. Commercials added 9,930 long contracts, but at the same time they removed, 17,305 short contracts. This is a huge swing, which I expect to see happen when a reversal is getting closer.    

When we look at the wave patterns in the VIX we can’t see those pretty impulse waves that Elliott Wave analysts love to make. From my perspective the VIX wave structure is all about diagonal waves, which can produce any of the overlapping, choppy waves that it can throw at us. 

Without first looking at the VIX, the DOW chart below will make little sense. There is an inverse relationship that the contrarians understand, but the majority ignored the VIX just like all the expert wave analysts did. 

Starting back in 1970 was not a Cycle degree 4th wave triangle, as 5th waves do not extend like this.  With stocks, we should always look for wave 3 to extend and occasionally the 5th wave extends, but in the case of the DOW, it extended in Minor degree.  When something extends, it is the smaller degrees that come out of hiding, and just because they look big and tall, does not mean they are huge degree levels as well. 

The two parallel lines show that the 5th wave never even came close to touching the top trend line again, as the DOW  started to roll over and away during the 2002-2007 bull market.  It’s just another example how trend lines can screw us up before they ever help us.  Besides, it’s not rocket science as even just a quick glance we can see the bullish trend.  It still may take the rest of this month to get a better picture if a major top is starting to hold, as this market sure wants to move in knee-jerk violent moves. 

When we look at many of the expert wave analysts, stock market charts, we see that the majority believe that we are in a SC or GSC degree type of a market. This can only happen when we count everything from the 1932 bottom as a 4th wave base in SC degree. I believe that a multi generational 5th wave can never extend like this, and through multiple solar cycles as well.

From the 2009 bottom to our present top is  just “One” move, but it subdivides into a sequence of 5 waves. I don’t ever recall counting out any 8 year bear market rally before, besides a real bear market rally would’ve produced far more extreme swings than what we actually observed happening in the real world. 

Insiders or smart money has left this market back in May 2017, so the only people remaining in this game are the emotional traders, investors and cheerleaders.  I’m sure you have heard the expression, ” Elvis Has Left The Building”, well this is a shining example, when smart money has already, “Left The Market”.  Only the fans remain, cheering for another encore!  

The odds are still extremely high that a Cycle degree wave 3 may still be in the process of completing, after which we should see a big correction that the majority will call a stock bear market. This entire process can still take years, but the start of solar cycle #25 will kill any bear market already in progress.

Quick VIX, 23 Year Triple Bottom Review

When we go back to the 1994 bottom and draw our horizontal line, we can see a massive base that is in the process of completing. The stock market crash of 2008-2009 already had clear indications it was ready to bottom as the VIX started to turn back in late 2008 already.  Will fear strike the majority of investors again? I sure think it will as the VIX is a contrarian indicator, which most investors or traders ignore. 

At this time the VIX represents investor complacency, matched only a few times since 1994. Even the expert wave analysts did not use the VIX in late 2008, because if they did, they would not have come up with that silly wave 1 in Primary degree.  

Steven Jon Kaplan, one of the smartest contrarians around, sure called it perfectly in late 2008 as his forecast was for the biggest bull market since the depression. He is now calling for a big bear market that should send the VIX much higher in the coming years. Eventually the VIX could hit the extreme of the $90 price level again.  It will never do this all at once, as there are trading limits in place to give markets a pause. With algorithms running amok in the financial world, you never know if these safeguards will actually work.  For the VIX itself, there are no trading limits.