VIX And The Stock Market

Any given day can be ‘euphoric bull bounce up’, ‘James Bullard or Richard Fisher Jawbone down’ or even ‘Hillary Clinton Tweet up, down, up and all around…’ but the market is going to get where it is going, ripples or not.

One thing that has not rippled since August has been the VIX. It has remained on a steady, post-(mini) panic Flag consolidation; a bullish-looking consolidation. VIX stabbed the support zone last week as we noted at NFTRH.com. This has remained a visual representation of players settling down and getting their psyches back in order. [1]

 

Here is the weekly view that we have been using in NFTRH. It was produced before the big upside event (stock market downside) as the former calm was just rippling toward the coming event. Click on this big boy, it’s a cool chart.

 

What comes next for the stock market?  NFTRH 360 laid out 4 options in order of preference (don’t go into automatic thinking mode folks, there are always different options).  Okay, so the bear case may be asserting itself and that has been the preferred case for the short-term.  But what of the over bearish market sentiment backdrop?  What of critical support tests?

Here is the definition of the word “test”:

“a procedure intended to establish the quality, performance, or reliability of something, esp. before it is taken into widespread use”

So if things get woogly in the markets again and the VIX potentially gets off the hook, try to keep a balanced attitude and realize that there has been a short-term plan of an SPX bounce to 1975 or 2040 (okay so it has only bounced to 2020) with a VIX consolidation to support.  This is 100% what we have been expecting and managing in NFTRH.

But this is only a prelude to further bear activity and then there is a next phase and a different set of options after the current plan plays out as it looks to be doing. The phase would begin with a test of the lows.

Meanwhile, here is a look at the real-time S&P 500 VIX Futures, which have not conclusively broken out of the post-August consolidation despite the pre-market disturbance. FWIW.

 

I know I write a lot of words and don’t give hard and fast conclusions. That is because I want us to be thinking open, not closed mindedly and because I don’t have an agenda[2]. Also, the nitty gritty probability and planning details and have to remain in the weekly market report and updates.

[1] Which has been curiously at odds with certain market sentiment data, which remain over bearish (ref. II’s Newsletter Writers polls and net short Small Speculators).

[2] Well sure, I want to see this pig dropped in face of policy that is ultimately destructive because I want to see honesty return even if honesty brings a world of pain (and Prechter, but functionally operating is a different story and there is an eventual (potential) stock-bullish story in play as well as a bearish narrative, and bullish does not always mean good or healthy in the bigger picture.  Nothing has been decided yet in this market.