VIX Divergences 8/25/2020
The VIX, VXN, and VVIX are all showing divergences.
1) The VIX made lower lows last week. However, the daily RSI made higher lows.
2) Recently, the VIX and RSI are both now making an uptrend. However, the VVIX is now in a downtrend. So that's a slight bearish divergence.
3) The VXN also made a bullish divergence with its daily RSI, yet the VXN remains largely flat.
4) The VVIX closed below 105 for the first time in months. However, the VVIX also recently made a bullish divergence with its daily RSI.
Essentially, this is showing me mixed signals. That said, if I were to weigh the evidence, there are more bullish divergences than bearish ones. It's still confusing. The VVIX closing below 105 for one day does not mean much. However, if the VVIX closes below 105 for more than a week, then volatility may be over for a while.
Currently, I have a projected volatility "bunny hop" sometime 8/26 afternoon to 8/27. The local wedge is almost at its end. That's assuming the channel support holds too. With liquidity still high, I am not expecting a big jump. That said, the VIX needs to start taking steroids and jump higher soon to keep for VVIX alive. The primary reason why the VIX is this high is because the P/C ratio is well below 0.70. So there are way more calls than there are puts at a lightning fast rate. So, the VIX is recognizing this as excess greed.
1) The VIX made lower lows last week. However, the daily RSI made higher lows.
2) Recently, the VIX and RSI are both now making an uptrend. However, the VVIX is now in a downtrend. So that's a slight bearish divergence.
3) The VXN also made a bullish divergence with its daily RSI, yet the VXN remains largely flat.
4) The VVIX closed below 105 for the first time in months. However, the VVIX also recently made a bullish divergence with its daily RSI.
Essentially, this is showing me mixed signals. That said, if I were to weigh the evidence, there are more bullish divergences than bearish ones. It's still confusing. The VVIX closing below 105 for one day does not mean much. However, if the VVIX closes below 105 for more than a week, then volatility may be over for a while.
Currently, I have a projected volatility "bunny hop" sometime 8/26 afternoon to 8/27. The local wedge is almost at its end. That's assuming the channel support holds too. With liquidity still high, I am not expecting a big jump. That said, the VIX needs to start taking steroids and jump higher soon to keep for VVIX alive. The primary reason why the VIX is this high is because the P/C ratio is well below 0.70. So there are way more calls than there are puts at a lightning fast rate. So, the VIX is recognizing this as excess greed.
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