In my blog last night I looked at the VIX Volatility Index INDEXCBOE: VIX
Ahead of a weekend, where more protests both peaceful and violent can happen, the VIX Volatility Index could help us see how much fear might come back into the market.
Another potential fear factor is with all the gathering of folks in the world, is if a second wave of COVID-19 happens.
Last night I wrote that the VIX or futures, in “The ideal situation would be either a new low under or around the 200-DMA, then a reversal in price, with a rally to close near an intraday high.”
Did that happen?
The green line is the 200-day moving average that comes in at 24.51.
Today’s low was 24.38 and it closed at 25.82, with the intraday high 26.43.
Exactly what I thought might happen could still happen for the Volatility Index.
In a reversal pattern, especially when the low is by a major moving average, we need to see a confirmation the next day.
Therefore, should the VIX close Friday above 26.42, the takeaway is that fear is returning and the recent mind-blowing move up in the stock market should prepare for a correction.
How far and how deep?
Let a steadfast trading strategy be your guide.
Have a listen to the latest Your Daily Five, Will the Wall of Resistance Hold? | Mish Schneider | Your Daily Five (06.04.20)
S&P 500 (SPY) Holding the gap thus far. That means price has to remain above 308.15. 313 resistance
Russell 2000 (IWM) 140 is pivotal. 147.25 big resistance
Dow (DIA) Sitting right on the 200-DMA
Nasdaq (QQQ) Made a new all-time high and closed red. Reversal? A close under 233.68 could say yes
KRE (Regional Banks) Loving the higher rates. 43.03 is a gap to fill
SMH (Semiconductors) 150 resistance. A close under 146.70 would be reason for caution
IYT (Transportation) 174.50 resistance and must hold 167
IBB (Biotechnology) 130-136 current range
XRT (Retail) 43.50 resistance and if weakens from here, could be time for a sell off
The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.