The VIX has traveled much deeper than what I was expecting. I’m looking for a bullish reversal which will spring the trap on the unsuspecting VIX bears. In the last month, the VIX bottomed 3 times which could be a signal that tells us that the VIX decline has had enough.
When the VIX moves it can be very violent as tons of buy stops will get hit until the 4th wave top. On this 90 day chart, the golden cross has just formed so a rally will stop the VIX from creating a death cross. You can call this bottom a double H&S pattern and even add the falling wedge for good luck.
I’m looking for a big bullish move with the VIX and soar well off the top of the chart.
The commercial hedgers are stacked to the long side by a ratio of about 2.4:1 and as usual, the speculators have taken the opposite position. Both can’t be right in their direction and violence will ensue (Increase in Volatility), once this skewed trade starts to unwind.
The January 2019 VIX crash has now gone deeper than expected and when that happens an instant wave count review should be initiated. The VIX is now sitting on the 200-day MA line close to the $16 price level. Is the 200-day-MA going to give us some support? A small triple bottom is also developing along with the new moon on Monday, so this can provide an additional reason for a reversal. If we are lucky we may see some COT updates but I won’t know that until late today. Investors as a group, have now started to calm down like a herd of cattle would after being stampeded.
We may see a mini VIX rally up past $20 again as this can also work as an expanded pattern at the Minuette degree level. As we can see the VIX is littered with many spikes in both directions and I try to look for the longest spikes which tend to hold the longest before the next reversal. All the market bullish hype in the world will mean little when the VIX is ready to turn.
The VIX has so far made a nice decline that still looks very corrective and may have hit a low point this morning. Patterns are starting to overlap again which is pretty normal in diagonal wave structures. Either way, the VIX bull party is far from finished, as we should see another record high develop in the next 3-5 weeks. Any impending wave 3-4 in Minor degree is going to give us a problem as a triangle could develop. A triangle inside a diagonal wave structure can be a real nightmare to sort out so we have to give it time to work through that part of the VIX correction.
One more low could happen but that should be cleaned up by the end of the week.
Commercial hedgers are already building short positions while the trend chasers are still net long. Once any Minor degree 5 waves are starting to complete then I will turn very bullish on stocks. This may still take a month or so with the exact time always being a challenge. March is a very popular month for turnings along with October as they reflect the yearly cycles.
Investors may stuff more money into funds in January to take advantage of any taxes they may want to avoid. Its when they stop, that the markets can crash again.
The bullish action of the VIX tells us that fear is present in the markets and at this time I believe the VIX has far more room to move up. A few big gaps opened up in December which were quickly filled or closed off.
Not until I can count out 5 waves up in Minute degree, will we get close to another correction in the VIX. The little H&S patterns being setup also adds to the VIX bullish picture. A bullish VIX means bearish stocks so investors are not getting any Santa gifts just yet. I don’t have sympathy for investors that are still trying to milk out gains at an extreme record high. It’s like playing with a hot potato. If the VIX breaks out to a new record high this week remains to be seen, as the odds of a sustained VIX decline are getting less and less. It may take the rest of the week but the VIX should charge to new record highs.
Most analysts ignore the VIX, and investors ignore the VIX even more. When the VIX soars, you know that the stock market will plunge. In January 2018 the VIX bottomed trapping all the VIX short players. This caused the spike up to the 50 price level which is an illusion. When I switch to line mode the 37 price level is the max. For all of 2018, the VIX has been in a bull market, and chances are good we will never see a new record low for many years. Stock euphoria and complacency would have to return in order for another huge leg up to happen in stock markets.
It’s next to impossible to be super bearish with the VIX as without fanfare the VIX has created the Golden Cross with this daily chart. The VIX is built with SP500 options and is the main reason why the VIX is this choppy. SP500 investors are walking into a bull trap while VIX bears are in a bear trap. The VIX would have to drop for weeks (50 days ?)before another VIX Death Cross can happen.
Right now the VIX is sitting on the 200-day MA and it created a couple of gaps on the way down. Those gaps will get filled on the way up as fear will return for investors? The Fed created a nice stock market bull trap and the VIX is the big indicator where we can watch it happen. Switch this chart to weekly settings and you will see that the Golden Cross just happened in November. These are very bullish long-term VIX indicators and most of the world ignores them.
It may take the rest of the week, but some more downside can happen, after which I expect a full reversal and a new record high for the VIX.
Stocks soared in a wave 2 in Minor degree yesterday, as the VIX crashed in wave 2 in Minor degree. Once these set of 5 waves start to come to an end then chances are very good, I will turn into a stock bull as we would be at my VIX “A” wave peak in Primary degree. “A” wave bottoms in stocks are Elliott wave “buy” signals, escpecially if they are Primary degree “A” waves.
If you want to witness wild diagonal waves then the VIX will give them all to you. Needless to say, this makes wave counting the VIX all the more challenging. The VIX also has prime examples of vertical spikes in both directions. I show a pattern that sure looks like it is still correcting with another zigzag. I would love to see the VIX crash and take out that November low. If the VIX still is this bearish, then stocks should remain bullish in the short term.
The commercial hedgers are net short the VIX so that doesn’t bode well for an instant stock market bearish decline. Mind you I have seen commercial traders positions change in rapid fashion and we won’t know that until every Friday afternoon. The Death Cross has been triggered but at these intraday levels, I don’t find them all that useful.
If the November rally is a bear market rally then this has to get confirmed by completely retracing my “A” wave bottom in Minute degree. This would be below the 16.09 price level.
With the stock market being bullish after the midterm elections, then technically the VIX should drop like a rock. It did drop like a rock but left an open gap in its wake. In the short term, the VIX could soar, closing off the gap but then resume another leg down. This leg down is just part of a correction which could end up being another zigzag as well. The stock bulls came out forecasting another huge move to the upside, but I don’t see it that way at this time. The VIX had its low in January 2018 at the $9 price level, so the VIX has been in a bull market since then.
The midterm elections went about as expected with the Republicans losing ground. It will definitely make it harder for President Trump to push through any agendas he has. In the end, if we relied on politics and fear to make investment decisions, then chances are good those decisions will not work out.
When I look at this VIX monthly chart it is impossible to count each little wave as there are no impulse waves to count. VIX and any commodities belong in the diagonal world where all the Elliott Wave impulse rules are broken. This is how options also behave because the VIX is built on using SP500 options. Each spike to the upside represented a “Buy” signal in stocks, but we are nowhere near that point at this time.
The VIX should eventually see that $90 peak again but not before any potential “A” wave in Primary degree arrives. Any move above those $50 spikes, would start to get us close. Any “B” wave top in the VIX would be a stock market buy signal. Watching the VIX is about as exciting as watching paint dry, so not to many analysts even give the VIX any attention.
The VIX is an emotional indicator, which is a “fundamental indicator” which can be used for the EWP.
The commercial hedgers are still net long, but it is starting to shift. When the commercials have built large net short VIX positions, then the end of the VIX bull run would be getting close.
That $9 base is huge so at some future extreme when the VIX hits $9, you know it’s high time to run to cash.
This VIX responds to this as it is made up of options on the SP500. It is the main reason why the VIX contains such wild moves. Impulse waves are a rare luxury in the VIX, so if you don’t understand the wild patterns involved, we can’t get close to see a reversal in stocks.
The VIX bear market also ended in early 2018, after which the VIX exploded as my potential “A” wave in Intermediate degree. We do have a vertical spike, from which we can get a correction or the end of a larger trend. The high of $28 has been reached and the next few weeks will tell, as I think the $50 price level still needs to get retraced. Ultimately the VIX should exceed the $90 price level, but not on this trip. The VIX pointing straight up is a buy signal for stocks, but it could also be a very short buy signal. When we hit the Primary degree top of the VIX, this is when we can take some long positions for the impending “B” wave counter rally still to come. One more move above 50 may do it, but only time will help confirm that.
Falling wedges create some kick-ass reversals, and the VIX is a prime example of that. The US dollar has a large falling wedge as well, as both will produce new long-term trends.
The world of commodities are connected with zigzags which are just diagonal waves, than can overlap. The VIX is some of the worst diagonal wave structures you will see, with siver getting my second vote. I look for the rough outline first. This has the potential to be a corrective zigzag. It would be nice that next week the VIX will still close that gap below us, after which fear could strike the markets on an even bigger scale. SP500 options make up the VIX, so we can see the extreme violent swings options can produce.
Spikes to the downside can happen in a flash, and usally at the end of a run, so you got to be fast to catch any bottom in the VIX.
The amount of time the VIX has been correcting just about puts it into an Intermediate degree position. It’s still a VIX bear trap any which way you want to look at it, as it is only a matter of time before the fear gauge starts to crank up again. The Death Cross finished about a month ago but the Golden Cross will still happen. The commercials are net long while those hedge funds or speculators are betting with net short positions. One group is always wrong and it sure isn’t the commercials. Combine that with a wedge and you have a deadly chance of the VIX exploding to new record highs by the end of this year.
Fear is going to come back regardless, after which the commercials will be turn net short again. Deflation is the main threat as we come of the most inflated asset world in history. Another quick flash to the downside can still happen, so we have to be aware of that.
I think this VIX has been in a long choppy decline, and just recently closed the two open gaps. Maybe we’ll get another low, but not a record new low. That January bottom should hold if the bull market in the VIX is going to perform for us. The next ride up in the VIX should be bigger and better, but sold out if it makes a very vertical move. Commercials are net long the VIX as the speculators are betting on the VIX short side.
They both can’t be right, and most always it is the speculators or the trend chasers that are in trouble. Any long positions in stocks would also crumble due to the long positions of the VIX commercials. Since all stops are closed, then we can look for and find fresh gaps a bit easier
In the last few days the markets suffered a bear attack send the VIX to new intraday record highs. Two of my unfilled gaps were filled in a hurry, but we have two big open gaps below present prices. All the markets need now is a little effort by the attacking bulls and this VIX could drop like a rock filling the two gaps below. Any gap has a 90% chance of getting filled, with the only question remaining is, “when”. Sometimes a gap will remain open for years (like gasoline futures) but eventually they will get filled.
There was nothing impulsive with this VIX run as these are typical diagonal wave structures. We are also one day away from a full moon, which can at times be very bullish for stocks. Maybe some calm will return before the next fear storm hits. Both gaps could get filled first, before another leg up in the fear gauge may happen. The bottom gap would also be a great support area as VIX reversals can be pretty violent. The vertcal move that the VIX did make should always be respected, as it is impossible for the masses to keep fear levels permanently elevated.
Diagonal wave structures dominate the entire VIX life cycle, just like they dominated and still dominate the entire Submillennium degree wave 3 still running today.
So far the VIX has crashed and we can make the argument that the VIX has gone lower than $12.29. That would make the late May rally another bear market rally. 3 wave zigzag crashes are pretty normal in diagonal waves, and this decline could fall even further. If a newer low becomes true then the May and June pattern cecomes just another wave 3-4-5. The big open gap is now closed, but there will be no rest for the VIX bears as 2 more gaps are now open above present prices. These gaps will get filled, as all gaps have a 90% chance of getting filled.
It may take all of June for these gaps to get filled, and it could be another violent move once the VIX bears realize they are in a VIX bear trap! A VIX “bear trap” means a stock market “bull trap”.
We are getting close to a VIX bear trap as the big gap is just about closed off. Wall Street calls the VIX the fear index and as the VIX crashes investors become oblivious to the trade wars that have started to erupt in 2018. All the bad news in the world doesn’t seem to phase the bullish investor at this time. Of course that can change in a blink of an eye as we now have 2 open gaps above present prices. These two gaps will get filled so, I’m confident in saying fear is going to come back into the markets for June.
At $13.40 the big gap will be closed after which it can develop a base and then soar again. Stopping well short of a new record low would be ideal.
As much as I would like to see the VIX soar, I cannot ignore the gap that is still open directly below present VIX prices. This gap should still get closed off and even travel closer to the $10 price level. The VIX should not crash to new record lows, if what we have is a potential VIX, 3 wave correction. Some traders were very well positioned to take advantage of the February spike with call options. A trader named ’50 Cent’ made a huge bet and others did as well. I’m sure that many others will see another VIX bullish set-up as this cycle keeps repeating itself. Once the VIX starts another leg up, another spike to the upside can happen. It’s pretty hard to control our emotions to do the opposite of what the crowd is doing, but you have to remember that the ‘crowd’ can never benefit from the very same crowd.
The VIX is one place that trend lines and wedges can be useful. When I talk about a potential bear trap in the VIX, then you have to invert that thinking when looking at the general markets. As we can see there are many spikes to the upside and also many spikes to the downside. Our recent large spike to the downside made the pattern look great as a correction. I’ve seen these spikes before where the VIX wanders down the entire spike and matches the end of the spike, or even goes a bit lower. In this case, $10 could get hit again, which inversely means that stocks can still see some upside for s few more days.
So far another falling wedge can be drawn, which also means that the VIX could be setting up for another surprise bullish move.
During the night the VIX executed a $5 swan dive, but it didn’t hit the water, but bounced off a trampoline and blasted right back up. These things do happen with regularity, but it did not show up in line type settings. For the fun of it, I call these computer algorithms gone wild! The speed they drop and return back up is just to fast for a super mouse clicker to generate. It seems that investors are so accustomed to low volatility, that they freak out when volatility shows up! From my perspective volatility in an asset class is a sign of a trend change in progress. In the case of the VIX it could be a bear trap as the VIX bearish phase could completed.
This could be a wave 2 low as not the daily charts look like a decent correction. Get ready to adjust your sails, as the wind is going to change direction soon.
I have been using different descriptions for basically the same pattern. They call them “Falling Wedges” and they produce powerful bullish reversals. From an Elliott Wave perspective, they are also called Bear Traps.
The bottom of the VIX wedge took about 6 months to build up before it exploded and has now been settling down in the last month or so. I had to switch this VIX chart to line type which took out many of the erroneous spikes and cut or peak price to $37.
I think there is a very good probability that the VIX may be in a wave 1-2 pattern, but the VIX may still need to fall to $13 or below. I have a little 5 wave sequence that soared, but now has just about been completely retraced. If the VIX drops below $15 then that single set of 5 waves didn’t go anywhere!
The reason those Subminuette degree 5 waves didn’t go anywhere is because it belongs to an expanded pattern which is sure starting to look like a zigzag correction so far. Zigzags do cut short but I treat them like running zigzags, not as a truncation.
Many are using the VIX to explain how bullish for stocks the falling VIX really is! Sure, that would be true if the VIX topped out at a $100 or so and has just started to fall, but we are looking at a potential huge double bottom. At $9 we also will have a huge Head & Shoulder pattern, which is also very bullish.
Since the 2008 peak in the VIX, we can see a huge falling wedge that has a 23 year long bottom. Even on the weekly scale we can see falling wedges. It’s not just one wedge, we have multiple wedges. Once I look over the VIX COT reports after Friday, I will know more which way the traders are leaning. Short term the VIX is still bearish, but I sure wouldn’t trust it to keep being bearish for very long.
When the VIX is declining, the excited bullish stock herd start to calm down, from the mini panic spike in late January 2018. Before the big spike, VIX players were in a trap with a small inverted Megahone pattern also showing. Inverted Megaphones are more open ended with the open end facing to our left on the charts and with the cone pointing east. A normal Megaphone would always have the wide mouth facing east (right side) and the cone would be pointing west. (Left side)
We still could see some dipping in the next few days, but no new record lows should happen. The VIX has wild and choppy wave patterns, but this is the real world when it comes to diagonal wave counting. Complaining about volatility will get us nowhere, and all I can say is, “Buckle Up”, as this roller coaster ride will start to get going again.
The COT report that comes out every Friday will give us a better idea who is still net long or short the VIX.
So far it looks like the VIX wants to keep the bullish run alive, and I’m sure not the one to try and convince the VIX into going the opposite direction. We have a small gap above present prices, but we also have a bigger gap still open below, at the bottom trend line. In the long term the peak $50 price level must get retraced if this VIX bullish run is to continue. Since the January bottom, the VIX has created higher lows which is encouraging that the VIX may have some running room left yet.
A small H&S pattern has been created, but this can be a very bullish sign as the VIX could be getting ready for another upside breakout. Besides the VIX retracing the $50 price level, it should also break the $90 price level in the next few years. Vertical fear levels cannot be maintained over the long term as investors would fall dead from all the stress fear creates!
The entire VIX pattern is diagonal related so it’s next to impossible to pick out a good looking 5 wave impulse, except for very small ones.
The VIX rocket move perfectly reflects the fear that was present in the SP500 and the fear gage is starting to dissipate for now. Of course, if the bigger bearish scenario is alive, then the VIX should find a bottom, followed by another leg up. This leg up could produce another complete set of 5 waves up, but not before a good correction has taken place. This may not happen until the VIX settles at the previous bottom of the 4th wave position. Just below that is a big gap that is still open, so this open gap has a good chance of also getting filled with this trip down. Just under $15 would close the gap which can repel the VIX to soar again.
Higher lows also have to dominate as well to help confirm that the VIX is still in a bull market.
Just before the end of February the VIX bottomed and now has to proceed back to its bullish phase. I think the entire VIX correction is a flat, as I count 3-3-5. Change this same pattern to a Primary degree flat, and we can use it for the DJIA Cycle degree correction.
Many VIX spikes that show in bar type charts, do not show up when switching to line type charts. This throws any wave count into constant disarray. We can see how explosive the VIX can be and I’m sure many new players have joined the VIX bull market.
Eventually all the contrarian indicators will pile up against this VIX bull market, so those VIX investors find themselves in a bull trap! VIX bulls will get slashed by the bears if they think they can “invest” in the VIX.
Our last price peak was about $50, so any bullish phase should surpass this price level by a large margin.
The VIX spiked up to 50 after which it turned south with a vengeance. It was an ugly correction and if I’m right, then another leg up in the VIX will happen. We can see that the VIX developed a “wedge” which every technical analyst is taught to recognize, yet they never saw this explosive VIX rally coming. Everybody on this planet was betting against volatility, but in doing so the VIX bears painted themselves into a bear trap.
Yes the commercial traders ended up becoming net short the VIX, but that can all change dramatically in a very short period of time.
One thing we can always depend on and that is investors can easily get into a trap, and recognizing this fact before it reverses is very important. The VIX is a world full of diagonal wave structures so don’t expect some perfectly formed impulse waves to develop. It isn’t going to happen, no matter how much we wish any pray for it to happen.
In late 2008 the VIX had already peaked out at 90, yet the bears persisted in forecasting lower lows in stocks.
Insiders were buying stocks in late 2008 already, so the VIX bull market was doomed at that time. Will this happen again?, of course it will, nothing will stop it. When the public and the VIX are in general agreement, then the VIX will see a dramatic reversal. This will not be easy to catch as the VIX may have to score 100+ before a big reversal becomes a reality.
The VIX has demonstrated what it can do after it is boxed into a corner or a wedge like condition. To the majority this was a surprise move that they never saw coming, but there are the few that did see it coming. The commercial traders sure saw it coming as they were net long for sometime already. Of course the non-commercial speculators were extremely bearish towards the VIX. How can you lose on a sure trade betting against volatility?
It’s easy if you owned a bunch of XIV shares and don’t know how to read charts. Of course, someone will always get blamed for, “taking down the house”. In my experience, it’s always the speculators that get into traps. The speculators, trend chasers, or managed money people, is always the group, being quoted in the financial news. When they are quoted, they are just about always in a trap as well.
The XIV will disappear as it sounds like they will stop trading in XIV by Februray, 20, 2018.
Last Friday they posted the COT report in the VIX. We can see a massive change by the commercials to a point where they are now in a net short position by about 45,000 contracts. Of course the speculators panicked and did the exact opposite. In other words, they are chasing the VIX bull market. Eventually the speculators will get into a bigger VIX bull trap and the markets will force another reversal.
There is a good chance wave 2 in Minor degree has finished with waves 3-4-5 still to complete. After these 5 waves up in Minor degree have completed, then we should see a massive VIX crash that will shock the majority again.
The VIX peaked at $50 and eventually the VIX should cross the $90 price level. The VIX may not do it on this trip, but by the time this bear market is finishing I’m sure the VIX will far exceed $90
Once I switched this chart to a daily type setting, the big long spike had opened up into a massive gap. This ETN is history folks, as they plan to stop trading it on February, 20th, 2018. It will disappear into the dustbins of history and take this wave count with it. You can add a Cycle degree wave 3 to this peak, but you will never ever see Cycle degree wave 4. The gravitational pull was so great that not even light could escape from it. Just like centers of universes have black holes, this ETN is also imploding into a black hole.
Credit Suisse ends obscure volatility security after an 80% plunge
The VIX had one of its biggest one day price jumps in its entire history, which the majority was betting on that it would never happen.
The dumb money or (managed money) were already in a massive bear trap, while the commercials had built up huge long positions.
Those investors that think they are investing will always get fried as you don’t invest in anything that is extremely leveraged and a futures contract that is all about volatility in the first place. When you are playing with fire, you can’t expect to not get burnt, but these emotional traders will blame others first for their mistakes. Being complacent in a violent and volatile world is the biggest mistake we can make.
The commercial reports don’t come out until Friday, but we should see the commercials closing off their long positions, but could also be building up their net short VIX positions. This doesn’t happen overnight, but can be a long process.
The VIX spiked to the $50 price level, but the $90 price level is the number to beat as that is the 2008 peak in the VIX.
XIV trader: ‘I’ve lost $4 million, 3 years of work and other people’s money’ – MarketWatch
I read the story above about the huge losses this XIV trader suffered. I’m sure he was not the only one as XIV crashed dramatically this week. This XIV ETN followed the bull market up as complacency dominated the stock market again. I don’t have any sympathy for those that think they are investing in double leveraged products, without thinking how much of a bull trap they were in, in the first place.
Smart money would already have been short, long before this topped out. This XIV crashed all the way down to $6.15 and I don’t think it’s finished by a long shot. Since it is very close to that magic $5 price level, any inverse stock split is highly likely. Usually we would be looking at a 4:1 inverse split which would price this ETN at about $24.
A simple tight stop loss would have protected most of your gains. Investing for the long term means nothing if we can’t see a potential crash setup, where all gains can get wiped out. The real VIX spiked up just like this ETN spiked down. I’m sure there were tons of stop loss orders crammed under the peak, so it takes very little to roll over and trigger these sell orders.
Now that the initial shock of, “The Big Dip” is starting to sink in, a counter rally seems to be in progress. I will work this as a potential wave 2 in Minor degree. There is a December bull market resistance area which could surprise us and give any bullish run some stiff resistance. Wednesdays can always be a good day for turnings, and so far the decline has been taking a break.
This potential wave 2 rally could take the rest of the week to play out, but the odds are that the bigger bearish trend will continue. Some are calling it the biggest one day point drop in history. Some of the analysts are also calling Mondays move a “Blue Monday”, which is just a name change from what they used to call, “Black Monday”, or any other day of the week.
Many talking heads, are looking for a simple 10% correction after which the bull market will carry on heading north.
The stock market crash so far is just a little bee sting and does nothing to solve underlying fundamental issues. Many experts don’t see any change in the fundamentals, so this bull market should be right back. Good luck with that thinking as fundamentals do not change prices, but price shifts change fundamentals. By forecasting a future price move, we know that the fundamentals will change as well.
This is the VIX, which made the biggest one day jump in its entire history as the VIX bears all got trapped again. It’s the VIX that gives a direct visual of the fear injected back into the markets. The VIX peaked out at the $50 price level, which ended up being just 40 points away from the fear level of the 2008 stock market crash. Eventually that $90 VIX price level should get exceeded by a wide margin.
The VIX should decline again if we are at a potential wave 1 in Minor degree. Any wave 2 decline with the VIX may not last that long, as fear levels like this cannot be maintained indefinitely.
The VIX sliced through the top trend line before it reversed. This trend line sure seems to give any VIX bullish phase some pause, but eventually the VIX would have to clear 5 of the biggest spikes, by a wide margin. The VIX could dip down to the $11 price range before it bottoms and soars again.