My analysis of the recent VIX action is clearly warning of a potentially massive
price volatility increase in the US and global markets. Many traders use and
trade the VIX as a measurement of volatility. The VIX is a measurement of the
expected market volatility over the next 30 days. As the VIX rises, traders
expect larger and more volatile price swings. As the VIX declines, traders
expect smaller and more narrow price swings.
Currently, the VIX is near historical low levels and has recently past a critical
cycle midpoint.
One can see from my cycle analysis, I am tracking to cycle events; a longer
term top-to-top cycle event and a smaller bottom-to-top cycle event. I call
these dual-phase and single-phase cycle events, respectively.
This analysis tells me we recently past a single-phase bottom cycle (near
Nov 30th) and are expecting a dual-phase top cycle event near Feb 17th. Given
the expected opportunity to retest the VIX high channel, the potential price
move in the SSO would relate to a 11%~16.5% price swing (approx) - or larger.
The dark blue downward VIX channel is a boundary that we would expect the VIX
move to attempt to reach. It could blow past this level and develop a much
larger price correction in the US and Global markets but lets just focus on
one target at a time for now.
Now, let's take a look as how this relates on the SSO chart.
On the below SSO chart, I have highlighted the critical VIX "Peak" levels
with rectangles and I have drawn the VIX Single and Dual phase event cycles.
You can clearly see how these event cycles align with critical price swings
and, most recently (after the US election cycle) correlated with a cycle event
low and high.
On the hard-right edge of the chart, I have drawn what I believe will be the
likely VIX cycle event target range and target date range. I expect the VIX
to increase moderately over in the next week or so and explode as stock prices
rotate lower. I expect the US and global markets to react to these time cycles
and for an increase in volatility. The chart shows a sharp correction as that
is the max potential, but we could only see a 2-5 day dip before it heads higher.
Either way volatility should jump soon and I plan to get involved with an ETF.
Our last few ETF trades generated some big profits with EDZ 20.7%, NUGT 11%,
and UGAZ 74% return. I feel the VIX is starting to show signs of an opportunity
unfolding.
