A potential increase in risk may create massive opportunities for investors.
Throughout our ongoing analysis of the US markets, metals, energy and other market sectors, one thing we have seen over and over is that markets can, and often do, develop longer term trends than most people believe are possible or believable.
Recently, numerous analysts have been warning of potential “critical crashes” and “deep retracements” because of the fear that this rally is nearing some type of end cycle. We believe the charts tell the story of the investor sentiment and that, at some point in the future, these predictions may become true – but not today.
The VIX chart tells us quite a bit in terms of volatility, trend and potential market changes. One can see from this chart that the VIX has been trending within a “flag formation” that reaches a pinnacle in October 2017. This contracting flag formation is telling us that, unless the VIX breaks this range substantially, it should continue trading within this range for some time. At some point in the future, the VIX will break this flag channel and we could, then, see much more dramatic price volatility and corrections. But, until that time, contractions will continue to be muted in size and the bullish trend is likely to continue for a while.
Notice the averages are near the 12~13. There is a strong likelihood that the VIX could pop into and above these levels, briefly, through natural market contractions in the near future. By our analysis, roughly every 10~15 trading days (2~3 weeks) the VIX attempts to make some attempt at these levels from extreme lows.
I originally wrote this article on June 7th, but was not able to get it edited and posted until this weekend. See my statement below regarding when the VIX was set to spike:
This cycle indicates we should expect a VIX spike near June 9th or 12th and June 29th. Well, Friday the VIX spiked big as the NASDAQ crashed. In fact, I did take a net short position on the VIX as I expect stocks will continue their trend higher and thus the VIX will fade back down. I took this swing trade with my automated VIX trading system AT VIX