VIX stuck within tight trading range
S&P 500 Volatility Index (VIX) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
VIX finished the week -11.7% lower at 28.16 after losing $1.37 (-4.64%) today ahead of tomorrow's Memorial Day market holiday. The bears were in full control today, moving the market lower throughout the whole session. Closing within the previous day's range, prices missed to decisively move beyond the prior day's trading range.
Daily Candlestick Chart (VIX as at May 22, 2020):
Friday's trading range has been $3.52 (11.22%), that's slightly below the last trading month's daily average range of $3.95. Weekly volatility is also lower, being below the market's average weekly trading range. The longer-term, monthly volatility is currently lower than usual for VIX. Prices continued to consolidate within a tight trading range between 27.67 and 31.55 where it has been caught now for the last three trading days.
Two candlestick patterns are matching today's price action, the Last Engulfing Bottom Pattern which is known as bullish pattern and one bearish pattern, the Black Candle. The last time a Last Engulfing Bottom Pattern showed up on April 13th, VIX actually lost -8.28% on the following trading day.
Prices are trading close to the key technical resistance level at 30.54 (R1). The index found buyers again today around 28.03 for the third trading day in a row after having found demand at 27.67 in the previous session and at 27.83 two days ago.
The stock index shows strength in the short-term supported by its long-term uptrend with only the medium-term trend being bearish.
Selling might accelerate should prices move below the close-by swing low at 27.67 where further sell stops could get triggered. Trading close to March's low at 24.93 we might see further downside momentum if potential sell stops at the level get activated.
Among the eight market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "Low close to prior low" stand out. Though it is usually interpreted as bullish, it has actually shown to be bearish for S&P 500 VIX. Out of 610 times, VIX closed lower 56.07% of the time on the next trading day after the market condition occurred.