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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