VIX Supports S&P’s Bearish Rising Wedge
Abigail Doolittle | Jul 31, 2012 08:23AM ET
Putting aside the exquisite pattern repetition in the daily chart of the VIX below, it is worth noting that the VIX began to confirm its small Bull Wedge yesterday within a budding Diamond Bottom marked in purple with both patterns serving as “helper” patterns to its most recent small Falling Wedge.
It is that Falling Wedge that is the inverse pattern to the S&P’s bearish Rising Wedge that has flattened enough to cause it to appear on a quick glance as a bullish Ascending Trend Channel but something that seems unlikely when viewed in the context of other equity indices and when viewed in weekly form and, of course, in looking at the strong pattern above.
Breaking each part down, the VIX’s Bull Wedge confirms at 18.47 for a target of 21 and it is supported by a gap at 18.99 with both that gap and the Bull Wedge supporting the VIX’s Diamond Bottom that confirms at 21 for a target of about 26.50 and a level that will take the VIX closer to the Falling Wedge’s target of 27.73.
It is this potential move up in the VIX that is likely to be accompanied by the S&P dropping to the 1267 target of its Rising Wedge and something that is supported by its own Bear Wedge with a target of 1329, a fraction gap at 1320 that is highly likely to fill and the strong possibility that the S&P will follow in the Russell 2000’s recent footsteps of dropping below its 200 DMA and a probability that puts the S&P below 1319 at least.
Might the VIX’s Falling Wedge drop lower for a “better” apex? It could, but it doesn’t seem likely based on the fact that the pattern’s current apex is very strong not to mention the fact that the sideways trading of the Diamond Bottom provides an early tell on the likelihood that it fulfills up as the S&P drops.
Put otherwise, the VIX supports the S&P’s Rising Wedge.
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