VIX long

24 Apr 2019

The VIX is building a powerful bullish divergence with the PPO and RSI. It is also locked into a tight descending wedge which is ready to play out to the up side with the divergences mentioned adding extra credence. There is a gap in the VIX at around the 24 point level which is most visible on the hourly chart; see for yourselves. When looking at the VIX it is also important to look at the SPX and the broad market which also support this case. Every major US index, from the December lows, has been going rapaciously up on lower and lower volume, forming tight bearish wedges and leaving many unfilled gaps below (8 gaps on the SPX!). The exception to this is the Russell 2000 which has lagged behind significantly - and small caps typically lead the market. This time, they may lead them lower. The overbought levels on the SPX, NDX and IXIC (looking the RSI) have not been this overbought since February 2018, right before the plunge early that month. Reading the news, it has also come to my attention that the net spec positioning on the VIX futures is almost a record low, about the same levels we saw prior to February's and October's plunge in the markets last year. This could lead to a major short squeeze and cause the VIX to explode vertically just as we have witnessed before. Right now, we are waiting for an impulsive move down on the broad markets: a solid punch through the rising wedge support levels and on high volume.

Thank you.