The Volatility Charts

I haven't posted any of the volatility charts in a while so I decided to post the RUT and SPX levels to locate some S & R levels as well as look at some possible ranges it may stay in for the next few months. I took the "log scale" off so you can see visually how wild this move actually was. I may allow you to start plotting a potential VIX range in the upcoming months. Right now the range is so huge that we'll need to see the next level of support to help us connect the dots.

Technically, both charts have broken below the 20MA and now seem to be on target to test the red 50MA. However, last weeks rallies were on light volume, and could collapse just as quickly next week. We have seen this happen many times in the past, and this time we actually have a longer term downtrend to help.

Regarding RUT, I must still follow what the charts are telling me, but with 3 aggressive days up in light volume I need to be prepared to take advantage of a pull back which could end up turning into a longer move. This move off the bottom has made 4 legs so far into 500 resistance so we'll see this week if it creates an exhaustion move before heading lower or if the bulls decide they want to take it up for a while longer. Next target for me is 520, then 550. At 550 I start scaling (small position) into some short positions regards of what the news is. That is NOT a recommendation, but the charts and past behavior suggest that if the RUT does move to 550 (strong resistance) then a pull back to 500 or lower is probable. This all in the context that we are in a downtrend and I want to go with the prevailing trend.

This brings us back to the volatility charts. The VIX has pulled back to some old resistance extremes and it wouldn't be surprising at all the see the market pull back strongly next week after hitting this target. If the market does continue to rally next week the bears will start salivating as this will just give them better low risk entries to the downside. It will be interesting for the SPX.

On the RVX side of things, it appears that the RUT could easily rally a bit longer to allow the RVX to drop more down to a support level like 45 or 40. I'll be watching those volatility levels very closely this week.


VIX Weekly Chart:




RVX Weekly Chart: