The CBOE VIX Volatility Index (VIX), which tracks the volatility of the S&P 500 options and futures market, entered today's session at the lower bound of the uptrend structure; it is gaining less than 0.5%. Significantly, we will learn today at 2:30 pm CPI data from the US, which will almost certainly bring a big move on the VIX index.
- In the scenario of higher inflation - likely VIX increases (strengthening of the dollar, yields, weakness in indices).
- In a lower inflation scenario - likely VIX declines (weaker dollar, improving risk sentiment and unwinding bearish sentiments)
Despite yesterday's lower-than-forecast PPI data from the United States, there was relatively little market unwinding, which may signal that investors are still very concerned that today's US inflation report for December will bring another 'warning signal'.
VIX (H1 interval)
Looking at the VIX, on an hourly interval, we can see that since December's 'volmageddon', which took place 2 sessions before the massive settlement of contracts on the 'day of the three witches', the VIX index has fallen, but is trying to return to an upward trend. It is currently trading 10% below local peaks, from yesterday's session. Looking at the last three upward impulses, we can see a 1:1 correction pattern, and a breakout above 20 points, by overbalance methodology, could open the index to new local peaks, along with growing fears of a return of inflation and cautious Fed policy. On the other hand, dropping below 17.7 points (overbalance confirmation) may open the way to retest local lows at 16 - 16.3 points.
Source: xStation5
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