Saturday, October 17, 2015

Falling VIX as SPX approaches significant resistance

Last weekend (SP500(SPX): A bear flag is forming...) we expected the SPX to move lower during the previous week.However SPX managed to slowly move higher.Currently there is a significant resistance zone at 2040-2060.We still believe that the current formation since late August is a bear flag.

VIX is falling rapidly suggesting increasing complacency. MACD (of VIX) is moving fast to negative territory and RSI is already near 30 which means that sooner rather than later VIX will get oversold and an increase in volatility will ensue along probably with a new downmove of SPX.

We believe that next week SPXwill form a small rising wedge towards 2040-2060 where it will probably reverse hard.