An examination of the volatility index (VIX) shows some interesting scenarios setting up. The volatility index is the measure of implied volatility for S&P 500 index options.
I have two charts for the VIX. The first shows the trading ranges that the VIX has established over the past 18 months. The gray rectangle represents the markets volatility (fear) trading range, then in late September when market conditions deteriorated further the VIX achieved a new level that, albeit shorter in duration, established a trading range of its own (orange box). A new trading range could be in the works if the VIX is able to stay above the horizontal line shown in the chart.
Also observe that on the next chart I have now drawn a trend line. This suggests to me that the horizontal price level line and the diagonal trend line may be a tight trading range for the VIX for the near term (blue circle).
The VIX is a ‘watch and see’
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