VIX breaks back above 20-day moving average
S&P 500 Volatility Index (VIX) Technical Analysis Report for Sep 16, 2020 | by Techniquant Editorial Team
VIX finished Wednesday at 26.04 gaining $0.45 (1.76%). Closing above Tuesday's high at 26.00, S&P 500 VIX confirmed its breakout through the prior session high after trading up to $0.59 above it intraday.
Daily Candlestick Chart (VIX as at Sep 16, 2020):
Wednesday's trading range has been $1.75 (6.91%), that's below the last trading month's daily average range of $3.43. Weekly volatility is also lower, being below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for VIX. Prices continued to consolidate within a tight trading range between 24.84 and 26.79 where it has been caught now for the last three trading days.
In a volatile session, prices traded above the previous day's high as well as below the prior day's low, forming a bullish Outside Bar. Despite a weak opening the VIX managed to close above the previous day's open and close, forming a bullish Engulfing Candle. The last time this candlestick pattern showed up on August 11th, VIX actually lost -7.28% on the following trading day.
The stock index managed to close back above the 20-day moving average at 26.03. Prices are trading close to the key technical resistance level at 26.87 (R1). After having been unable to move lower than 24.92 in the prior session, the market found buyers again around the same price level today at 24.84.
The trend is clearly bearish, showing an intact downtrend in the short, medium and long-term.
Among the five market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Bullish Engulfing Candle" stand out. Although it is usually interpreted as bullish, it has actually shown to be bearish for S&P 500 VIX. Out of 80 times, VIX closed lower 65.00% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the short side has been after three trading days, showing a win rate of 60.00% with an average market move of -0.44%.