VIX lights the fuse to explode – Charles Schwab

The Volatility Index currently sits around 27, having retraced 50% of the highs made in March. The decline has stalled in recent weeks, though, and could potentially be setting up for a rally that repeats history as VIX tends to rests highs after significant spikes, per Charles Schwab.

Don't miss: 

• S&P 500: 98% of stocks above the medium-term ma, correction phase – Credit Suisse
• S&P 500: Do not chase recent gains, focus on cyclical sectors – Morgan Stanley
• S&P 500: 5-10% pullback before market rally continues toward the 3386 all-time high – Charles Schwab

Key quotes

“With numerous potential market-moving events on the horizon, it’s easy to think of scenarios that could bring volatility back into markets. 2020 election, official US economic recession, COVID-19 and geopolitical turmoil are just a few events that could test investor resolve.”

“25 is a key level to carry forward. Prices gapped up above this level in March and represent an area of recent support for declining prices. A sustained downside break would indicate a clear shift in momentum and could lead to serious declines.”

“Moving averages are clearly cascading lower as prices printed consecutive weekly lows. Short-term bounces could be met with resistance as sellers remain in control until trends shift. Prices would need to rally over the 37 level to end the trend of lower highs and lower lows.”  

“Stochastic RSI is turning positive after entering oversold territory. This, paired with bearish momentum could indicate stalling price levels and sideways chop in coming weeks.”

About the Volatility Index 

$VIX is a real-time market index representing stock market's expectation of 30-day forward-looking volatility. Derived from the price inputs of the S&P 500 index options, it provides a measure of market risk and investors' sentiments.