Jump to content

The VIX price suggests a spike in market volatility might be nearing

Recommended Posts

A weaker dollar (USD) and stronger equity markets has seen a risk on trade environment reflected thorugh a gradual decline in the Volatility index (VIX) as well.

bg%20bull%20and%20bear%20032094803.pngSource Bloomberg

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 09 February 2023 

Often referred to as the ‘Fear’ guage, the VIX highlights the relationship between 30 day put and call options on the S&P500 benchmark index.

The index is known to reflect the cyclical nature of volatility and market participants will now be considering whether current prices, which trade near one year lows are suggestive for at least a near term spike in volatility to follow.



902VIX.pngSource IG

The VIX has been drifting lower since late October 2022. The move lower follows a bearish price reversal near resistance at 34.30.

The long-term trend for the VIX remains sideways, as tends to be the nature and cyclicality of volatility.

Over the last few days, we have seen the price forming a bullish reversal just above range support at 18.20. The reversal starts to suggest that after a few months of a risk on market environment we could see the market move into a risk off phase.

The risk off market environment is not yet confirmed. For confirmation, we would like to see a strong move up above the red trend line on our chart. In this scenario 22.50 becomes and initial resistance target from the move, while traders might consider using a close below the 19.95 level as a failure indication for the trade should it manifest.

Key data

Over the next week or so there is certainly enough in the way of US data which could catalyze at least a near term spike in volatility which would reflect in the VIX:

  • 10 Feb Preliminary UoM Consumer sentiment data
  • 14 Feb Consumer Price Index (CPI) data month on month (m/m) and year on year (y/y)
  • 14 Feb Core CPI data m/m and y/y
  • 15 Feb Retail Sales m/m
  • 15 Feb Core Retail Sales m/m
  • 15 Feb Empire State Manufacturing Index data
  • 16 Feb Producer Price Index (PPI) data m/m and y/y
  • 16 Feb PPI data m/m and y/y

Amongst the data, the CPI release is likely to have the highest propensity for volatility, being a measure of inflation, a core theme in markets right now as it pertains to the path of monetary policy. While CPI is not the primary metric for the Federal Reserve to measure inflation (Personal Consumption Expenditure is), markets have in recent times taken their cues from each monthly print.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 22/09/23 16:31
  • Posts

    • Traditional banking systems served as the gatekeepers of financial services for long, dictating how people access loans, save, and invest in opportunities. Typically controlled by a centralized system with a single authority such as a bank or government in total charge, this centralization is limited by high fees, restricted accessibility and slow transaction speed. Dentralized finance, DeFi, got introduced as a blockchain-based financial system that removes intermediaries or central authorities, and utilizes smart contracts instead. By eliminating intermediaries, DeFi delivers core benefits like improved accessibility into the financial system for everyone having internet connection regardless of their location. DeFi is also valued for its transparency. While traditional banking system often deny customers audits on how their assets are being managed, DeFi, through the help of blockchain allows anyone access to tracking and auditing transactions, thereby raising trust. Furthermore, DeFi also offers various financial services and products like DEX, lending and borrowing, stablecoins etc, all known to proffer varied innovative solutions, while operating 24/7 in contrast to traditional finance. DeFi isn’t flawless as issues like insecurity, lack of consumer protection etc are still prevalent; however, the growth of DeFi has been impressive; since its introduction, the total value locked in DeFi protocols has grown significantly indicating that the demand for DeFi services is fast growing. DeFi seems to be redefining financial industry by offering an alternative to traditional banking systems. With the increasing adoption, can we expect to see an overhaul in the way we access financial services?        
    • Leverage is good but please use it according to your risk management system coz the higher the leverage the higher the risk, I trade my perpetual futures on Bitget tho, the exchange offers high leverage but I only use according to my risk management system.
    • Yeah, BGB is designed to create a simple, secure, and accessible crypto ecosystem. It offers exclusive benefits to holders so I believe it worth holding from my analysis.
  • Create New...