Volatility – Annual Review
Volatility Technical Analysis opens a new series of Annual Reviews. Over the coming weeks, we will examine very long-term developments across bonds, forex, U.S. and global indices, S&P 500 sectors, precious metals, energy, agricultural products, and selected large-cap stocks. Each segment will evaluate short-, mid-, and long-term prospects from multiple analytical perspectives, supported by statistical work and probability-based frameworks. For those considering joining our community, this period offers a particularly valuable window. Let’s begin.
CANDLES
Daily
Monthly
We have discussed multiple times that very large volatility frames (larger than the monthly) are not particularly reliable for forecasting, so this study remains focused on the monthly horizon.
On the monthly map of four volatility-tracking instruments, all closed December with either strong continuation or bearish confirmation candles. This configuration implies that the odds for a continued decline in volatility remain meaningful. All four monthly trends are bearish and are reinforced by multiple technical signals.
At the same time, a number of smaller frames that also closed on December 31 tell a different short-term story. The 1–10D frames closed with bullish signals of varying strength, while the 15D frame is firmly leaning bearish. Taken together, the candlestick message suggests that early January—potentially much of the first half of the month—may remain constructive. Beyond that window, roughly in two weeks, the dominant longer-term bearish volatility trend is likely to reassert itself.
One plausible catalyst for this transition is the start of the Q4 earnings season, which opens around January 14–15 with reports from major financial institutions such as Goldman Sachs and Wells Fargo. That period may provide the trigger needed for volatility instruments to resume their broader bearish trajectory.
MACD and 8/20 EMA Crosses
I ran a statistical analysis of major bearish events, such as 8/20 EMA and MACD bearish crosses on the monthly frame. The historical data show that bearish periods tend to last significantly longer than episodes of elevated volatility. Over the past 13 years, the average bearish run has been approximately 13 months. Given that the current cycle has been underway for about four months, a remaining duration of roughly nine months would be consistent with historical norms.
It is also important to note that two bearish runs during the analyzed period extended beyond 20 months. In that context, a continuation well into 2027 would not be surprising and should remain a consideration in the broader outlook.
Summary
VIX is pointing to a choppy start to January, with higher volatility likely lasting for a few weeks. After that, conditions are expected to stabilize, with volatility fading and January likely finishing on a bearish note for VIX.
From a broader perspective, the volatility index remains in a strong bearish cycle. Historical patterns show that these regimes tend to last much longer than short-lived volatility spikes. With the current run still relatively young, it would not be surprising to see suppressed volatility persist through most of 2026 and potentially into 2027.
Happy Trading!
