VIX Analysis March 2015 (W,M)
Created on Sunday, 01 March 2015 02:07
Written by Austin Galt
The Volatility Index (VIX) is now approaching a critical juncture. Let’s find out what that is beginning with the monthly chart.
VIX MONTHLY CHART
We are well aware of the massive bullish divergences in the Relative Strength Indicator (RSI), Stochastic, Moving Average Convergence Divergence and Momentum indicators. This looks to be a ticking time bomb!
The MACD shows the averages coming back together again so this indicator has arrived at its very own critical juncture. Do the averages make a bearish crossover or do they move away from each again as they trend up due to price also heading up? I favour the latter.
Another critical juncture relates to the Parabolic Stop and Reverse (PSAR) indicator which pertains to the dots. The dots are currently at 11.79 and for the month of March are likely to be around 12.10. Price breaking below there would look bearish in my opinion. I doubt it will happen but with the February price low being 12.86 things are going to be tight.
VIX WEEKLY CHART
The PSAR indicator had its support busted last week which likely means there is a little longer and lower to go.
However, price should not go lower than the horizontal line I have drawn which denotes a bullish double bottom with the trend. This level stands at 11.52. Breaking below here would be very bearish in my opinion. That would also mean the monthly PSAR support was taken out. I doubt it.
The Stochastic and MACD indicators are both trending down bearishly however their respective averages have diverged quite a bit so perhaps time is nearly up on this move down.
I have added moving averages with time periods of 50 (blue) and 100 (red) and there was a bullish crossover back in December. The big moves normally happen a while after these events and I think we’ve been pretty patient.
I have added Fibonacci retracement levels of the move up from July 2014 low to October 2014 high and price is now challenging the 88.6% level again. I favour price trading a bit lower and a low in the second week of March in the low to mid 12 region looks like a good possibility.
Once the low is confirmed then the fireworks should start cracking pretty quickly. And the show should be worth the wait!