Volatility Index-Did it Bottom?

June 4, 2020

Mish's Daily

By Mish Schneider

blankMy last blog we looked at the volatility index.

Ahead of a weekend where more protests both peaceful and violent can happen, VIX 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-DMA 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.

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 VIX close Friday above 26.42, the takeaway is that fear is returning and the recent mind-blowing move up in the market should prepare for a correction.

How far and how deep?

Let a steadfast trading strategy be your guide.

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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

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