Tag Archives: VIX Bear Trap

VIX Daily Chart: VIX Bear Trap Review!

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.

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VIX Intraday Crash Update

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”.

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June, 1, 2018 VIX Intraday Crash Update

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.

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VIX Intraday Plunge Review

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.

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VIX Daily Chart: Falling Wedges Are Bear Traps!

 

 

 

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.

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VIX Intraday Update: Calm Before The Storm?

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.

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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.

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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.

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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!

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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. 

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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. 

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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.

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VIX Intraday Record Low Update

This morning the VIX imploded setting yet another record low in the last few months. Will this be enough before the VIX starts on a bullish run? On this intraday scale, there are two gaps still open above present prices, which must get closed off. How long that will take is always uncertain, but the big gap good give  the VIX a realistic price level to struggle with.

Last weeks COT report had the commercials at a net long position by a wide margin. This Friday they may add to their bullish positions, which is what I would like to see. The little arrow I show is the start of a potential bullish phase, which bottomed at the 9.13 price level this morning.

All the indices have gone nuts this morning with virtually all indices that I cover,  pushing to new highs. Just like there is a potential for a VIX bear trap, the reverse would be a bull trap in the 5 indices I watch. 

Indices don’t stop on a dime, but they do create blow-off situations where they do look like they stopped on a dime. It’s like trying to stop a speeding semi on the freeway, and forcing a complete reversal. 

For now the new VIX bottom has to hold, but if other gaps open on the way up, all bullish bets could be temporarily derailed again.   

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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. 

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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.

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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. 

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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. 

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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.

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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. 

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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.

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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.  

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VIX Index Record Lows Update

I show a bit of a wedge between my trend lines and it doesn’t necessarily mean a new record low will happen.   The VIX tells us that the majority of investors sees no storm clouds coming and there is no need to worry. Of course, this happens at every major stock market top as well.  Complacency can only last so long, as history shows VIX spikes can happen when the crowd least expect it.  

Right now the VIX is still going sideways, and may never hit a new low.  All downside gaps seemed to be close, but there is one open gap above present prices around the $23 price range.  This will be a target for a potential turning point in the future, but for now it’s not that important.

The top trend line will offer resistance, but if a bigger degree is in effect, then the top trend line will get sliced.  Extreme bearish lows are breeding grounds for bull markets, and the VIX is no exception, except that we constantly have to think inversely to stocks to understand it.  

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VIX Intraday Wild Swing Update

I applied a few wave positions this time, but we have to be aware that we are dealing with extreme diagonal types of waves. On June the 9th the VIX had its last major low,  which has not been exceeded at this time. This has produced a higher low which is the conventional description for a bull market.  

 A massive spike up, and then this morning we had another spike to the downside.  This downside price spike, is what I would like to see hold.  

I mention before that the VIX could see the $15 price level, which stopped close to my invisible top trend line.  The VIX has to crush this $15 price level, if a larger VIX bullish phase is already in progress.  I’m not a big fan of the trend lines being used in the markets, as they have abused trend lines to a point that they no longer make any sense. Besides, any kid with a ruler can draw trend lines, once they know how to join 2 or 3 peaks together. 

I switched to use two parallel lines, as that can work for 3 wave zigzag moves and 5 impulse waves as well. When the markets break away from two parallel lines, chances are good, it’s a correction or a diagonal.  

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VIX Daily Chart New Record Low Review

The VIX has now broken to the downside, creating a new record low in the process. The crude wave count that I do have, is all about diagonal wave structures as there are only a few great looking impulse waves between the zigzags. The entire VIX pattern is diagonal all the way, so if you want lots of practice looking for diagonals waves, then the VIX is one great place to start with.

Stocks have now backed off a bit so we could see a rise in the VIX  or a complete bullish phase that will impress us, once it gets going.   A bear trap in the VIX is a bull trap in stocks so they really don’t travel without each other moving inversely to each other. 

Many consider the VIX a pile of bullshit, but don’t tell that to the contrarians the called  the bottom of the 2009 crash, followed by the peak in the VIX in late 2008.  I show the 2015 peak as a wave 4 in  Intermediate degree which was a much smaller peak than the peak of late 2008.

Now we have to see if it all holds and the VIX starts to make another run north.  

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VIX Intraday Record Lows And H&S Review

The first thing that stands out with the VIX is a very scary Head and Shoulder Pattern. The VIX can never go to zero and below the $9 price levels, it is bouncing off records as well. When any H&S pattern develops near record lows, it is something I pay attention to.  This H&S pattern is easy to remember as it looks like someone is giving you the middle finger.  Somebody is being told off, and I bet it’s meant for all those crazy stock bulls that are extremely complacent.

All big open gaps are now closed off, but a few are now visible above us. The commercials are still net long by over a 2:1 margin, while the speculators are doing the exact opposite, by being net short.  Between the two, somebody is wrong, and my bet sure is not on the side of the speculators. 

The VIX bears are in a bear trap, and it is only a matter of time before all those bearish protective buy stops, start getting triggered. 

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Mini SP500 Intraday New Record High Review

The markets keep pushing our buttons, as it continues to push higher every time we think that this stock party is over. Instead, they find more booze and return to the stock party just one more time. Of course, when we are intoxicated we have the tendency to stagger around, not really certain of where they want to go.

In the long run every bull market comes to an end, as no bull market can keep a perpetual high!  The majority are so sucked in as the VIX has clearly shown us. This morning the VIX broke a new record low, which also closed off all the big open gaps we had hanging around.   When the herd of investors are all crowded into the same trade, it doesn’t take rocket science to figure out who is going to lose in the long run.

Even now the markets are trying to push higher, but these are not patterns of a healthy market, they are the signs of desperation and fear of being left behind.

The Gold/SP500 ratio is still hanging around the maximum of 2. Today it takes you 1.90 ounces to buy one unit of the SP500.  This indicator does not have a big spread, as when this market was cheap, it only took  .75 of a gold ounce, to buy one unit of the SP500.

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Markets Soar As The VIX Crashes: Another Bear Trap!

This month the VIX has made some violent moves, but this is the nature of the beast when, fear and leverage are combined. This chart is now showing us another great looking H&S pattern and at the same time setting up a great VIX bear trap.  Inversely, it would be setting up an SP500 bull trap. I have seen many of these and it always reminds me that the market gremlin is giving stock investors the middle finger salute.

All the stock indices soared to new record highs, except for the Russell 2000 which seems to be still leading the race down.

Last weeks COT report, had the commercials add VIX contracts with 9885  contracts, and at the same time removing 16,198 short contracts. Once combined, this is a very substantial shift in their positions, leaving room for only one direction to come, and that is up!   Shorting a position like the VIX is insane when we are at record lows already, but this is what traders love to do.

One little fast drop down, could be what it takes to force a reversal, but longer term the fear index will rise again, and cause all sorts of angst with investors.

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VIX 1994-2017 Review: Are The VIX Bears In A Trap?

Some say that what happens after the VIX hits 10, the markets go higher.  I turned this chart to line type, where we see that the VIX has never hit 10 or  lower since 1994. It also smooths out many of the wild and errant spikes, and is also in log scale.  I drew a line across the base which, when the VIX  gets close to, the fear level soared, producing a major bear market with stocks in response.

When we look at the late t 2008 price peak of 60, the VIX then started to crash.  By late 2008 Kaplan was already giving major warnings that the stock market was a buy, along with reports of massive insider buying. Even Warren Buffett was super bullish.  All the wave analysts were bearish as they had major bearish wave counts at that time.  Of course they all ignored the VIX warnings and ended up in a big stock bear trap

At that time the majority was running from stocks as fast as their little fingers could produce “Sell” mouse clicks.  Another time that the VIX displayed a buy signal, was with the VIX peak in late 2011. This was the start for, “Stock Mania”, until the next VIX rally, which corresponded very well with the 2015 wave 4 stock market low.

Now the VIX is still heading south getting close to a 23 year tripple bottom.   Is it going to be different this time and the VIX drops to zero? The majority always work from “price”, as they seem to think that at a certain price, magic starts to happen.

Stock market insiders have already sold out long ago, as the media suggest to get “Greedy” in buying stocks, when the VIX is at a 23 year low.   Wow, talk about a biased opinion.   The contrarian usefulness of the VIX has not changed, as its low price has forecast starts to many stock bear markets.

Sure, this stock market, and the VIX can still gyrate around, but the VIX can turn when we least expect it, sending fear waves through the markets.

The VIX commercials are also skewed to the net long position, so that is the last group of experts that I would argue against. It is the idiot speculators that chase the trends, and the majority of the time, they are the ones that get in a VIX bear trap.

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VIX Hits New Record Lows And A Potential Bear Trap

 

Just like many of the stock market indices I cover, the VIX also developed a massive gap as it crashed to the downside.   A new  record low was also established, but by only a dime.  The commercials are still net long with the Futures VIX contract, which is what we want to see at major VIX bottoms. Fear or the VIX cannot go to zero, and I doubt that they will ever inverse split the futures contract. 

The entire VIX pattern is nothing but diagonal wave formations, and if we see an impulse wave counting then I’m sure it will be wrong.   Can the VIX go lower? Sure, it can but we know the entire gap will get filled again, as any gap has a 90% chance of getting filled. The top trend line sure can be part of a wedge type pattern, so this  gives us a clue that violence and fear are going to return.  

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VIX Daily Chart Bullish Review

 

It’s been awhile since we looked at the VIX. In general the VIX has already been in a bullish phase since late January 2017, about 2 months ago. Is there more upside to come? I think there is even though the VIX just created a spike to the upside.  Diagonal bull markets have a tendency to do that, and the VIX is a chart that has extreme diagonal waves in it.  

Short term the VIX should retrace the entire drop from the gap above. This would be very close to the $23 price level, which also coincides with Trumps election results. Two events or indicators around the same price level is a great price target as, the entire Trump VIX decline should get completely retraced.  Of course that would push the VIX past my top wedge line, which just adds some nice fuel to a bullish perspective. 

All the bull talk with the VIX, is very bearish for stocks, which the SP500 reflects the best. Many ignore anything to with the VIX, when they do look at the VIX,  they can twist its action in many different ways. Don’t tell that to any contrarian as they know how to use the VIX very well.  The VIX is an excellent contrarian indicator for the stock market, which served its purpose well, in the 2015 stock bottom and the August 2015 VIX top. 

Longer term that August 2015 top will also get retraced, but that still could take years before this happens.  Our near term $23 price level is about the only thing we need to watch right now.

The COT report still shows the commercials as being net long by a wide margin, but I would expect that number to change when the VIX upside is running out of wind it its sails. If the expert wave analysts had incorporated the VIX back in 2009, they sure would not have come up with the insane stupid call that they did.

Five waves down in Intermediate degree in the SP500, was a forced wave count, which the VIX never confirmed in a matching pattern. It was not even close!

Of course Steven Jon Kaplan had already been calling for the biggest bull market since the depression, while wave analysts were still dicking around drawing mindless numbers and letters.  Don’t think that the 2009 bottom was a fluke when wave analysts got it wrong. They got it wrong in 2002 as well. It is not a stretch of the imagination that they will get the next bottom wrong as well.  It may take another 2-3 years to find out, but every bearish stock wave count that will be  in sympathy with the herd will fail. 

If we refuse to learn our lessons to buy low from the 2002 and 2009  bottoms, then they surely will not learn anything from any potential 2021 low as well.  

I may criticize modern day wave counts, but that is because they do not want to do the hard work required to find their mistakes. It is much easier to create cosmetic changes to their wave counts than going back 100 years and finding the true positions.  The reason for so many big wave count failures with the stock market is that since 1929 they all worked with extended 5th waves and not even looked for the extended wave 3.  

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