Everybody would like that know that. Although VIX is in principle a forward looking index it is a poor predictor. VIX volatility has in fact been shown to be highly correlated with backwards looking volatility, not future volatility. So let us take a look at the past then, a full 13 years full of different kinds of crises and crashes.
As can be seen from the chart, each significant spike (to the level of 50 or above) has been followed by a lenghty period of cooling off. These periods are characterized by a series of lower highs forming a descending triangle with the support as the foundation. Each descending triangle in the past has been formed on a foundation on a different level. The cooling off period has varied from 1,5 years to 4 years.
The level of support of the present triangle is clearly elevated as compared to the earlier ones. Moreover, there has been several lower spikes within the past year. These factors can indicate that the market is still a bit squirrelly, it is keeping itself on its toes, so to say. However, each event so far has resulted in a lower high in VIX, so cooling off is in the process.
So what is VIX telling us then. I would say it tries to tell us that these things take time. Although there seems to be all kinds of bubbles, we can easily continue with the present bull market practically the whole year. That is of course if nothing dramatic happens and we continue making lower highs in VIX. Towards the end of the year the probability for the breakout increases and the bubble burst is inevitable. Then there will be ”blood on the streets”.
Take care and trade safe
Cheers, Whoop
As can be seen from the chart, each significant spike (to the level of 50 or above) has been followed by a lenghty period of cooling off. These periods are characterized by a series of lower highs forming a descending triangle with the support as the foundation. Each descending triangle in the past has been formed on a foundation on a different level. The cooling off period has varied from 1,5 years to 4 years.
The level of support of the present triangle is clearly elevated as compared to the earlier ones. Moreover, there has been several lower spikes within the past year. These factors can indicate that the market is still a bit squirrelly, it is keeping itself on its toes, so to say. However, each event so far has resulted in a lower high in VIX, so cooling off is in the process.
So what is VIX telling us then. I would say it tries to tell us that these things take time. Although there seems to be all kinds of bubbles, we can easily continue with the present bull market practically the whole year. That is of course if nothing dramatic happens and we continue making lower highs in VIX. Towards the end of the year the probability for the breakout increases and the bubble burst is inevitable. Then there will be ”blood on the streets”.
Take care and trade safe
Cheers, Whoop