Fear drains away as VIX sinks lower

VIX_daily_fears_ebbs_awayAs US equity markets continue to defy gravity and move inexorably higher, so the VIX slides ever lower as market complacency takes hold with risk on appetite continuing to remain firmly on the menu. And the daily chart for the VIX really tells its own story with the volatility of the Brexit shock waves now well and truly calmed, normal service has been resumed. The UK vote saw the VIX rise sharply to a high of 26.72 before reversing into a sustained waterfall, which has since seen the index close below the key support level in the 12.70 area, as denoted with the blue solid line on the daily chart. This is the area which held firm in the past, and provided solid support earlier in the year, and capping further gains for US markets as a result. In addition, the volume point of control is now firmly above the current price action in the 14.00 area and providing further downwards pressure on the index with the trend monitor confirming the bearish picture. Following the breach of VPOC the VIX now looks set to move lower still with the potential to achieve single figures in the medium term, and for confirmation of potential support levels, we need to move to the weekly chart.

Vix_weekly_fear_ebbs_away_001The key support level here is now in sight at 10.88, a price point last seen in mid 2015, and which provided the springboard for a sharp move higher, but as complacency reigns, so this level is likely to be tested, and if breached, opens the way for a move to single figures. It is at which point the alarm bells will start to ring, and could even be the point at which the ‘big short’ bears may finally be proved right…..at last!  I guess if you call a top often enough, you are bound to be right at some point! For volume traders, the real truth lies in volume price analysis, and when the selling climax does finally arrive on the indices , it will be clearly signaled on the slower time frame charts with climatic price action and an extended distribution phase. However, this extreme scenario is not on the horizon at present, so for the time being, it’s steady as she goes with the fear index continuing to sink ever lower.

By Anna Coulling

Charts from NinjaTrader and indicators from Quantum Trading

About Anna 1054 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

2 Comments on Fear drains away as VIX sinks lower

  1. Hi Anna and thank you for the webinar yesterday wish I had seen it before learning some hard lessons in the past months , I guess hard lessons are the one you remember …
    I have read your book a tridimensional approach to forex markets and keep reading it back, amazing
    Also I suggest it on forex factory in my profile Kribstreet.

    One question the gold seems to have found a base of support and bounced back around 1333 levels
    After touching 1310
    I wonder which could be the reason of such bounce considering equities are shooting higher and higher and the fix c
    Keeps plunging ?

    Thank you and have a great holiday


    • Hi Matteo – many thanks for kind comments and delighted you enjoyed reading the book and thank you also for recommending this on Forex Factory. I’m glad you were able to join David and myself in yesterday’s webinar and we will be back with these again as soon as we have completed the course material and had a short break! With regard to your question on gold, I did write a short post recently on the metal which has become bearish from a technical perspective, but of course the drivers for gold are many and varied and unique for this commodity. Amongst these are the US dollar, inflation, fear and safe haven, and of course the precious metal per se. The recent strong spike higher on Brexit and subsequent knee jerk reaction now appears to be settling, with gold now picking up the bearish tone once again. Longer term, inflation holds the key, and with the CRB index rolling over, commodities in general have been finding it hard going at present. Thanks once again and all best wishes and look forward to seeing you in the room when we get started after the summer – regards Anna

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