THE NEXT WAVE OF VOLATILITY

26 Jan 2021

Market volume is drying up and we're seeing historic put:call ratio's on the indices. We have the necessary ingredients in the cake for a another wave of volatility to hit the market. Please see my previous post about the VIX and the compression patterns that often occur. Volatility tends to get bottled up and then erupt. We are likely in a bottling-up zone where fear is gone, and all is calm.. I suppose this can continue but I like to think we're nearing a volatility cycle low. I am of the opinion that the VIX is in a new, giant, price wedge. If you look at this chart, I think (a) will be tagged.. but perhaps it already has? I don't know. It could be now or it could be weeks from now. I'm speculating on the pattern some, but I will be looking to hedge my portfolio with long calls in volatility over the coming weeks.. and even months if necessary. I have learned to completely ignore mainstream news and focus entirely on the data. The math doesn't lie. People do.

Something to think about- Let's pretend I'm right about this being a new, giant price wedge. If this forecast turns out to hold water, then the market is likely to go significantly higher over the next couple of years.. I don't want to even mention numbers because this could be a big pattern. Regardless, I'm looking for the next wave of volatility to come rolling in. I've been around long enough to know that the market can creep & creep for weeks or months before pivots. Timing a market top is extremely difficult so one must not be too biased or emotional.

Another possibility: What if the VIX is already out of the cage? What if this isn't a new compression wedge? This pattern is my "optimistic" perspective for the markets.. It's possible that the vix could take off like a rocket to new highs where markets completely unravel. In time, the fundamentals WILL take over. I have no idea how much time we have.. all I can do is analyze the data.

26 Jan 2021

Nota

26 Jan 2021

Nota

There is a gap way back here that will eventually be filled. I wonder if it gets filled first?

27 Jan 2021

Nota

Renko, small pattern could indicate near term direction. These compression patterns exist more often in the vix than anything else I've seen

27 Jan 2021

Nota

Green circle, let's see how vix handles it. It has acted as resistance so it'll be interesting to see if the bigger move is about to begin or if this is just a little, normal vix spike before creeping down for weeks or more.

27 Jan 2021

Nota

wow, what a day. I just noticed that the breakout from this little wedge reached the measured move target. Measure the opening of the triangle and move to the breakout point. Impressive. This was a big move for one day so I wonder if the larger move is underway. I don't know. We'll just have to see what happens over the next few sessions

28 Jan 2021

Nota

vix weekly- lower indicator. Need I fill in the blanks?

2 Feb 2021

Nota

I suspected this would happen. In fact I took quite a bit of profit yesterday and even hedge with some vxx puts in case vix dropped.. well, it sure did.

Now think about all those poor souls that were buying overpriced GME calls with outrageous implied volatility... Wall Street took a LOT of money from main street once again. I will not get into that argument.

Keep your eye on the prize. Study the price cycles (sine) in the vix and be very patient. When I build a position in volatility, I do so with a very, very careful strategy.