Volatility – Special Update
Volatility appears to be nearing a critical pivot from an Elliott Wave perspective. Several recent signals suggest the current corrective structure may be approaching completion. In this update, we examine the wave formations and key invalidation levels that could determine whether the next move is a powerful spike—or a complete unraveling.
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Elliott Waves
The current wave structure of Volatility futures (VX) is revealing. If the market were gearing up for a volatility spike due to Middle East tensions, we’d typically expect a more aggressive setup—perhaps an impulsive or diagonal formation for a circled wave. Instead, the structure appears clearly corrective, which opens the door to a larger ABC or WXY formation, not a sustained rally.
From a classical pattern standpoint, this formation resembles a flag, though confirmation is still pending. If the top is confirmed in the next few sessions, the next likely move would target the purple or blue rectangles.
That said, there are risks. In complex corrective waves, the final leg (C or Y) can sometimes extend to 1.618x or more of the first wave, so we can’t rule out one last spike. However, given the extreme overbought conditions on many hourly frames—similar to what we saw at the top of wave A/W—a reversal may be just around the corner.
I think we will know much more tomorrow morning and by the end of the trading session.
Happy Trading!
