Volatility – Daily Analysis
Tomorrow is almost guaranteed to be entertaining. Based on some very rare signals, we can outline a likely volatility trajectory for the session. Once all futures close later, I’ll update the SP500 view. For now, let’s review the candles and corresponding technical indicators—essential context for anyone trading, entering, or hedging tomorrow.
CANDLES
Daily
Today, the S&P 500 VIX closed just $0.01 above the upper 3-standard-deviation Bollinger Band. Statistically, this is a very rare event, with an approximate probability of 0.135%—about 1 in 740 occurrences on average.
Historically, when VIX has pushed this far above the band, it has almost always closed lower the following day and tended to follow one of two paths:
- Topping scenario: VIX typically opens above today’s close and finishes with a Dark Cloud Cover or Bearish Engulfing pattern.
- Continuation scenario: VIX opens lower and prints a neutral candle while holding above all major support lines.
Based on historical behavior, the continuation scenario (option 2) has consistently signaled proximity to a volatility top; the topping pattern (option 1) often follows shortly thereafter. We saw two clean examples of this sequence at the beginning of October, as highlighted on the chart.
We will see how volatility behaves tomorrow, but the top in VIX (and, correspondingly, a potential market bottom) could be very close.
Happy Trading!
