Brace yourself for the coming spike in the VIX, says northmantrader
Here we go again. The great volatility crushing of stock markets that happens when markets levitate relentlessly and everyone gets bullish. But don’t let the calm waters during this options expiry week fool you — the calm won’t last.
What’s the main message here? Big structural patterns of compression interrupted by short-term spikes resulting in the building of bullish descending wedges that eventually produce a much larger spike . The big spikes then result in an aggressive crush of the VIX VIX, -4.59% in an extreme tight falling wedge pattern.
One notable feature: When VIX gets crushed following spikes any gaps on the way down eventually get filled. All of them.Several key observations: While some gaps can stay open and unfilled for years this large number of open gaps are unlikely to remain unfilled for an extended period. Indeed the rally of January 2018 also was riddled with open gaps. All of them filled in February 2018.
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