Volatility Index – Did it Bottom?

In my last blog, we looked at the volatility index.

Ahead of a weekend where more protests both peaceful and violent could happen, VIX could help us see how much fear might come back into the market. Another potential fear factor is that, with all the gathering of folks in the world, a second wave of COVID-19 could happen.

Last night, I wrote that the VIX, or futures, in “[t]he ideal situation would be either a new low under or around the 200-DMA, then a reversal in price, with a rally to close near an intraday high.”

Did that happen?

The green line is the 200-DMA that comes in at 24.51. Today’s low was 24.38 and it closed at 25.82, with the intraday high 26.43. Exactly what I thought might happen could still happen.

In a reversal pattern, especially when the low is by a major moving average, we need to see a confirmation the next day. Therefore, should VIX close Friday above 26.42, the takeaway is that fear is returning and the recent mind-blowing move up in the market should prepare for a correction.

How far and how deep? Let a steadfast trading strategy be your guide. Have a listen to the latest Your Daily Five, where I guest-hosted:

  • S&P 500 (SPY): Holding the gap thus far. That means price has to remain above 308.15. 313 resistance
  • Russell 2000 (IWM): 140 is pivotal. 147.25 big resistance
  • Dow (DIA): Sitting right on the 200-DMA
  • Nasdaq (QQQ): Made a new all-time high and closed red. Reversal? A close under 233.68 could say yes
  • KRE (Regional Banks): Loving the higher rates. 43.03 is a gap to fill
  • SMH (Semiconductors): 150 resistance. A close under 146.70 would be reason for caution
  • IYT (Transportation): 174.50 resistance and must hold 167
  • IBB (Biotechnology): 130-136 current range
  • XRT (Retail): 43.50 resistance and, if weakens from here, could be time for a sell-off

Mish Schneider


Director of Trading Research and Education