Volatility – Daily Update
Two days ago, volatility flashed an important signal, but the setup required patience. We noted that the next meaningful confirmation would likely arrive within two sessions. That waiting period ended today.
In this quick update, we review the message the Volatility Index has now delivered, examine the technical evidence behind it, and look for historical references that may help frame what comes next for markets.
CANDLES
Today, all VIX-tracking instruments failed to close at new lows on both the daily and 2D frames. I treat this as a warning sign and a potential indication that at least a short-term bottom may be near. At the same time, the MACD bullish crosses on the first three charts continue to expand, which remains a strong direction-changing signal.
The most important development comes from VX futures. Two days ago, VX made a sizeable gap up and formed bullish reversal candles on the 2D, 5D, and 10D frames. Today, the next 2D reading arrived. As shown on the chart below, the current 2D candle sequence is practically identical to the mid-January setup: a strong Bullish Engulfing followed by a consolidating Doji. This time, however, the supporting technicals are stronger, which suggests that the next upward push in volatility could be more forceful.
Tomorrow, VX closes the 3D and weekly frames. At this point, both candles have fair odds of repeating the January combinations. If they do, we should be prepared for a volatility spike next week.
