COVID-19 caused unprecedented global demand destruction continues while the rebounding S&P 500 Index advanced until last Thursday and then gapped open lower Friday, potentially activating a redrawn bearish Rising Wedge. 

S&P 500 Index (SPX) 2830.71 slid 6.03 points or -.21% last week after declining Thursday and then headed for the declining 50-day Moving Average at 2758.52 shown by the red line in chart below. Friday's gap open lower set off a new potential Rising Wedge shown below as Rising Wedge V2.

(Click on image to enlarge)

The impulse wave down to 2192 on March 23, marked with a 3 label (Elliott 3-wave). On the rebound, it created two possible Rising Wedges, the first after reaching the 50% retracement level and a second gap open lower on April 21, below the dotted upward sloping trendline. After the first potential Rising Wedge, it reversed and climbed up to 2939.51 (small blue arrow) last Wednesday, April 29, closing just above the Fibonacci 62% level at 2937, marked with an Elliott 4-wave label. Friday's gap open lower, the third for this rebound, set off another potential Rising Wedge, with a measuring objective below the initial low on March 23. 

CBOE Volatility Index® (VIX) 37.19 added 1.26 points or +3.51% last week. Our similar IVolatility Implied Volatility Index Mean, IVXM using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option, gained 1.31 points or +4.25%, ending at 32.14%.

The spike up to 77.15% on Monday, March 16, the day SPX declined 324.89 points, will likely mark the top for this market decline. Considering the COVID-19 demand destruction uncertainty it may stay somewhat elevated for some time.

(Click on image to enlarge)

VIX Futures Premium 

This next chart shows as our calculation of Larry McMillan’s day-weighted average between the first and second-month futures contracts as of last Friday.

With 12 trading days until May expiration, the day-weighted premium between May and June allocated 48% to May and 52% to June for a premium of -1.39%, back into the bearish red zone vs.1.73% for the week ending April 24.

The premium measures the amount that futures currently trade above or below the cash VIX, (contango or backwardation) until front month futures contract converges with the VIX at the next monthly futures expiration on Wednesday, May 20.

The relationship of the futures curve to the VIX, as measured by the premium, makes a good real-time sentiment indicator.

(Click on image to enlarge)