No analysis of equities would be complete without a look at the VIX, and here the picture is extremely interesting, and no doubt worrying for all concerned. Indeed, even the CBOE have said the VIX is ‘scary low’. On the one hand we have the equity bulls worrying as to whether the current rally is now approaching a strongly overbought region, whilst on the other hand equity bears are worrying that the VIX could go lower still and down into single figures, squeezing them even further, at which point everyone will be panicking!!
The technical picture for the VIX really tells its own story. The resistance region is now firmly in place at 22 and just above, whilst the platform of support is becoming increasingly well defined in the 12 region as the index repeatedly tests this level, but fails to break through. Naturally, it goes without saying that should this price point be pierced, an extremely strong level of resistance will then ensue, causing equity bears even more pain and distress. The volume at price histogram (to the left of the chart) paints this picture very neatly for us with two very well defined bars of price congestion which also show the bias to the downside. The trigger for any move lower may just be dear old Saint Nick delivering a festive year end to market bulls once again.
By Anna Coulling