Is the VIX setting up for a breakout?

13 Mar 2022

Here's something I've been watching lately: the VIX has been painting a parabolic curve under its lows. We can see above there is a slightly descending resistance line with three perfect points of contact. It appears to be building balance higher and setting up for a breakout. If this was any stock painting this chart pattern, I would be buying it hand over fist right now.

Also worth noting is that S&P E-Mini futures (ES1!) added over 72k contracts to open interest across all months on Friday, on a down move and closing on its lows.

My expectation is for VIX to break out and extend to 55.

I expect that if the VIX is going to break out, it will happen in the next 5-7 trading days. Otherwise we should expect to see a breakdown of this pattern and a lower VIX for the next few weeks.

14 Mar 2022

Not

Minor correction: Final CME bulletin for Friday shows an increase of 47.9k contracts to open interest, not 72k. This is still a significant increase.

16 Mar 2022

Not

Well the pattern appears to be breaking down this morning. At the same time ES is breaking out above a descending trendline on the daily chart. The most recent test above this trendline failed on 03/03/20. Watch the reaction to the FOMC release this afternoon. If VIX closes down and ES closes above its trendline, this indicates a market state change from bearish to neutral-bullish.