Six years ago we all wondered “What Does the Fox Say?” (by Ylvis). Now it is time to wonder “What Does the VIX say?”
Well, a look at the VIX daily chart shows an interesting pattern. First, there’s a (much) higher high last week compared to mid-April, while the S&P500 is marginally higher (black arrows). This is called positive divergence. Divergence is only divergence until it isn’t, but it means in the current setting/context that investors are not as confident now then they were in April. Second, the VIX’s price action over the April-June time frame is rather similar to that of August-September ’18 (orange squares) : spike, drop, secondary lower spike, drop, and then moving up again. That’s called a fractal. Doesn’t mean it has to play out the exact same way now as then, but it certainly can and it is thus note worthy to monitor.
If it does play it, the S&P500 could be carving out an expanding diagonal 4th wave pattern. See chart below. It is one of the Elliott Wave Options I am tracking, among others.
Namely as I wrote in this past weekend’s premium member weekly major market weekly digest “The four main Elliott wave counts I am tracking, and shared earlier this week, remain in effect. Clearly all options eventually point higher [short- to long-term], so I am NOT bearish on the stock market in the bigger picture. It’s all a matter of how we get to SPX3950+ over the next few years.”
“[Because] Please remember the markets always have a Bullish and Bearish option, and to remain intellectually honest as an Elliottician and technical analyst one must recognize them, place odds to each option, track them, and report them. Otherwise one will fall prey to hubris, which in turn will result in big losses. The saying on Wall Street is “a rising tide lifts all boats”; and all though it has lifted many, clearly the risk-on indices ([NDX], RUT, SOX) remain the laggards … and why -among other reasons- I continue to remain hesitant to give “the Bull” the all clear just yet.”