Sven Henrich via Northman Trader

Time to check in on the good old $VIX.

Crushed again on Friday following another week of meaningless chop during trading hours. The broader price ranges continue to be printed in overnight hours, be it magic overnight lows leading to gap ups and ramps, or, as on Friday, seeing highs made during pre-market an th tight price ranges during most trading hours.

Fact is markets stayed in a tight range for the past 3 days.

And $VIX got crushed on Friday into the close:

Who need protection anyways. After all it’s a happy worry free market on autopilot.

What’s the latest action tell us about the $VIX?

Interestingly enough that $VIX crush on Friday accomplished something that needed to happen: Fill the lower $VIX gap.

My view: All $VIX gaps fill eventually. While equity markets have been stubborn to not fill many open gaps below, the $VIX is more consistent in filling gaps and that spells perhaps good news for fans of volatility.

Why is that? Because $VIX has now left 3 open gaps above, not only that, $VIX has also build a wedge formation which is bullish:

That wedge has risk lower still, but note how this week’s ever so temporary market dip got $VIX to the upper trend line before rejecting signaling relevance.


Bottomline: $VIX is winding up again and it will want to press higher and fill these gaps.

Perhaps also of note is that the $VIX has so far printed a higher low while $SPX went on to new highs, similar compared to the run ups to the January and September 2018 pre-correction peaks:

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All of these patterns leave the door open for a much larger $VIX spike to materialize still in 2020. $VIX 46 remains on the table as a risk scenario.


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