My analysis of the recent VIX action is clearly warning of a potentially massive price volatility increase in the US and global markets. Many traders use and trade the VIX as a measurement of volatility. The VIX is a measurement of the expected market volatility over the next 30 days. As the VIX rises, traders expect larger and more volatile price swings. As the VIX declines, traders expect smaller and more narrow price swings.
Currently, the VIX is near historical low levels and has recently past a critical cycle midpoint.
One can see from my cycle analysis, I am tracking to cycle events; a longer term top-to-top cycle event and a smaller bottom-to-top cycle event. I call these dual-phase and single-phase cycle events, respectively.
This analysis tells me we recently past a single-phase bottom cycle (near Nov 30th) and are expecting a dual-phase top cycle event near Feb 17th. Given the expected opportunity to retest the VIX high channel, the potential price move in the SSO would relate to a 11%~16.5% price swing (approx) – or larger. The dark blue downward VIX channel is a boundary that we would expect the VIX move to attempt to reach. It could blow past this level and develop a much larger price correction in the US and Global markets but lets just focus on one target at a time for now.
Now, let’s take a look as how this relates on the SSO chart.