🟩 VIX is coming to 18 month low

2023年4月17日

🚨🚨ONE LINER🚨🚨
Attention, traders! The Volatility Index (VIX) is approaching an 18-month low, which could indicate a strong bullish signal for the market.

Background: Two months ago, in December 2022, I discussed the significance of the VIX dipping below the 20 level as a key milestone for a bullish market. Today, I want to dive deeper into this topic and share with you three compelling ideas that support the notion of an imminent bullish market. Let's explore the historical context and see how this information can help us make informed decisions in the current market.

💎IDEA 1 OF 3: VIX as a Key Reversal Indicator
Since 2022, the VIX has demonstrated a strong correlation with market reversals when positioned under the 20 level. This pattern suggests two possible outcomes:

If the correlation breaks and VIX continues to stay low, we might see a sustained bullish trend.
If the market reacts positively to today's FED communication, it could further solidify the bullish sentiment.
It's essential to keep an eye on the market's reaction and the VIX's behavior from this point forward. During the bear market, the VIX typically fluctuated between 20 and 32, so a sustained drop below 20 could indicate a significant shift in market dynamics.

💎IDEA 2 OF 3: VIX Levels During Market Rallies
Historically, a VIX level below 20 is often associated with market rallies. Although we are currently above 20, the VIX remains relatively elevated compared to periods of strong upward trends. As the VIX moves closer to the 20 level, it's important to watch for signs of an impending bullish market rally, similar to what we experienced on December 4, 2022.

💎IDEA 3 OF 3: VIX as a Market Transition Indicator
In previous market transitions from high volatility bear markets to low volatility bull markets, the VIX played a crucial role. As the VIX pushed below the 20 level and remained there long-term, it allowed the market to rally upwards. We can use this historical precedent to study the current market and determine the probable direction.

CONCLUSION:
The VIX nearing an 18-month low presents a compelling bullish signal for traders. By analyzing the VIX's behavior as a key reversal indicator, its levels during market rallies, and its role in market transitions, we can gain valuable insights into the market's probable direction. Keep an eye on the VIX as it approaches the critical 20 level, and stay tuned for updates on the evolving market landscape.

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Here is a section for the real trading geeks who want to learn further:
Let's examine some historical examples that highlight the VIX's behavior in relation to market trends.

Example 1: 2009 Bull Market Rally
In March 2009, the VIX dipped below 40, a significant milestone after the 2008 financial crisis when it had reached an all-time high of 89.53. As the VIX continued to decline, the S&P 500 rallied more than 60% by the end of the year, marking the beginning of a new bull market.

Example 2: 2012 Market Rebound
In 2011, the VIX spiked above 40 during the European debt crisis, causing increased market volatility. However, by early 2012, the VIX had fallen back below 20, coinciding with a strong market rebound. The S&P 500 gained over 13% that year, reflecting a renewed sense of optimism and stability in the market.

Example 3: 2016 Post-Election Rally
In the months leading up to the 2016 U.S. Presidential Election, the VIX experienced increased volatility, hovering around the 20-25 range. After the election, the VIX dropped below 15, and the stock market began a multi-year rally that continued into 2018. This period of low VIX levels correlated with significant gains in the S&P 500.

These historical examples illustrate the VIX's ability to signal market sentiment and direction. When the VIX drops below key levels, such as 20, it often precedes a bullish market rally. By monitoring the VIX and its relationship with the overall market, traders can make more informed decisions and capitalize on potential opportunities.

Happy trading from TinTinTrading!