Friday, May 31, 2013

$VIX Perspective

Here is some perspective on the VIX. Below are 2 charts with my CRAYON based opinion. Often enough, the CRAYON is the simplest way of looking at trends. You have my permission to make fun of my drawing skills ;-)
12 months chart: VIX has tried to break out and failed 5 times. BUT, they also tried to break it down and it bounced solidly off the 12level. Just like a high jumper, give it enough tries he/she will be able to clear the hurdle. In this case, the VIX with a solid footing may be able to break out (bearish the market) from this descending trend. See the lower chart for some more perspective of how high can it go...
5year Chart: So how high can it go? VERY HIGH ;-) Furthermore, I see the same footing level and lower highs. To me, this is the VIX tightening and could be winding for a big move. At X, the tighter the range could indicate a potential big move. Though the direction is unknown, the likelihood is UP (bearish) since the 5 year footing has prevailed.