The Bizarre Structure on the $VIX

I would like to take a moment to discuss the strange structure on the $VIX.

If we simply back up and look at it plainly, it’s a giant wedge or triangle. And it’s quite odd. The $VIX often forms wedges, but I have never seen one so large. I’ve never seen it slam up against 35 so many times over so many months without ever getting a spike into the 40s.

VIX

And, truth be told, though I don’t like to “count” the $VIX, it actually does sort of count very well as a triangle and it could imply a spike to 45 or higher in the future:

VIX

And what I find interesting about this is that if it’s been in a triangle, then it’s also possible that the S&P 500 has been, too. And I like that because, as a rule, if you ever feel trapped in an unending hellscape of a market, it can often mean that you’re in a “B-Wave” triangle. I haven’t ever been very satisfied with any of the ways that we can most commonly count the decline this year in equities. There are significant problems with all of them. It is of course one reason why I haven’t had an easy time projecting with high certainty where it is we’ve been going.

But, if we attempt to replicate the triangle on the S&P, it sort of works pretty well here, too:

ES

And so then we would look for a relationship between orange “A” and orange “C” like this:

ES

And we do have the 2.618 just below us at about 3550, which is roughly where the 250-week EMA is.

Triangles are simply large, consolidations where enormous institutional rotation occurs, and they give the market time for such moving averages to catch up. It is possible that that is simply what we’ve been enduring.

The good news of course (for bulls) is that despite how low orange “C” ends up going (let’s hope it doesn’t go to the 3.618), the structure as a whole is definitely “corrective” in nature, and would imply that once it’s done, the bull will resume and new all-times will eventually be reached (so no Great Depression for the bears).


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