A Different Way Of Timing The Market
The chart I’m presenting today may look confusing initially, but it has
some rather startling implications.
What you’re looking at is a daily chart of the VIX. I have identified
Fibonacci retracements off most of the major swings. As you can see, there is
a noticeable tendency for the trend in volatility to change direction at the
38.2% and 50% retracement levels.
While I am not ready to draw any definitive conclusions about this, the
chart tells us to explore the possibility that turning points in volatility
can be anticipated in the same way they can be anticipated in price action.
Further study is required. But if volatility behaves in this fashion when
we look at the VIX historically over long periods of time, we just may have yet
another viable tool for timing the market. Remember, the VIX generally moves
in an inverse relationship to the market as whole. Notice how the VIX has risen to a 50% retracement of the most recent swing. If that is the case, it implies the potential for a short-term bottom in the markets.
Have a great weekend,