News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Wall Street
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • The continuity seen across these volatility cycles is a good thing. Historical precedence offer a blueprint for identifying conditions supportive for a vol-event to occur, and how they may unfold. Deepen your knowledge of historical volatility here: https://t.co/vg7w10la3j https://t.co/7Yd5Tzua0d
  • Do you know the difference between investing and trading? Because while the goal might seem the same, they're very different things . Learn more here.https://t.co/fG6fNEPj9q https://t.co/A0W3CA5EWh
  • The Canadian Dollar remains supported amid elevated crude oil prices. Don’t be surprised if the Bank of Canada disappoints aggressive hawkish expectations. Earnings season is a wildcard. Get your weekly Loonie forecast from @ddubrovskyFX here: https://t.co/iyb5OmW2S4 https://t.co/Oh35VUg9Gr
  • Rather than focusing on earning a specific number of pips per day, traders need to focus on what can be controlled. In trading terms this relates to following a strategy perfectly, with no emotion or hesitation. Learn more here: https://t.co/6ZH026QLRN https://t.co/jQ9HH9KuWy
  • Slippage can be a common occurrence in forex trading but is often misunderstood. Understanding how forex slippage occurs can enable a trader to minimize negative slippage, while potentially maximizing positive slippage. Learn about FX slippage here: https://t.co/Blrl0uF2Ct https://t.co/VXiNCuR3bF
  • The Spinning Top candlestick pattern forms part of the vast Japanese candlestick repertoire with its own distinct features. Gain a better understanding of the spinning top candlestick here: https://t.co/DWm7cBMUg9 https://t.co/9SC4I69oi7
  • The European Central Bank will consider it a job well done if there is no movement in EUR/USD or the Euro crosses before, during or after Thursday’s policy announcements by its Governing Council. Get your weekly Euro forecast from @MartinSEssex here: https://t.co/TCTonpE9Ik https://t.co/qq6TTaPtLE
  • Further your forex knowledge and gain insights from our expert analysts @ddubrovskyFX and @FxWestwater on JPY with our free Q4 market analysis guide, available for free today.https://t.co/mzeJ5x73N3 https://t.co/zll2sxL4ja
  • Becoming a forex trader means living and breathing the excitement, risk and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? Read here to discover the qualities and processes it takes to build consistency: https://t.co/EfWEACQ6Cz https://t.co/Js6SNdNj9y
  • Looking for a new way to trade reversals? One of the most used reversal candle patterns is known as the Harami. Like most candlestick formation patterns, the Harami tells a story about sentiment in the market. Get better with trading reversals here: https://t.co/kIIBffEMi7 https://t.co/MqFQ9uS26R
Should We Apply Technical Analysis to VIX and Volatility?

Should We Apply Technical Analysis to VIX and Volatility?

John Kicklighter, Chief Strategist

Talking Points:

  • Technical analysis does not work particular well on measures of activity or features of a system like it does for market pricing
  • However, with the securitization of VIX and volatility measures; this segment may be more critical in generating financial system movement than indexes
  • There are large wedges closing on their apexes near record lows for both the medium-term VIX and short-term VXST that deserve attention

What are the DailyFX analysts' fundamental and technical forecasts for the Dollar, Euro, equity indexes and more through the fourth and final quarter of the year? Download the recently-released 4Q forecasts on DailyFX.

Normally, I don't apply technical analysis to data and derivative measures of the financial markets. I am a believer that most technical analysis - with the exception of some momentum and similar readings - is a degree of self-fulfilling prophecy. When there is a psychological level, an extreme oscillator reading or familiar chart pattern; the mere recognition from a wide enough swath of the market in a particular market backdrop (more speculative influence than 'investor') promotes a response from market participants. That shouldn't be the case with something like GDP readings or from volatility measures. The increasingly popular VIX Volatility Index - dubbed the 'fear' gauge - is a measure of implied volatility a month forward derived from S&P 500 options. This is in essence measure of anticipated activity over that period or often considered a cost of insurance. Yet, that rudimentary role is definitely changing.

In the past years, we have seen a dramatic rise in popularity surrounding activity measures - probably because they exploded during the Great Financial Crisis and then completely collapsed in the years that followed. At this point, with no actual volatility to seemingly be found in the spot capital markets, it seems volatility itself becomes more interesting. With an interest and an ambitious financial sector, it should come as little surprise that an effort to securitize this market measure has led to extremely popular products with sometimes dubious backdrop and suitability as investments for the average market participant. On the one hand, we have the VXX short-term volatility ETN which has seen an explosion of volume over the years despite projecting a constant devaluation - far more aggressive and not-zero bound than the indexed VXST. Then there is the XIV inverse volatility measure which has become the 'buy the dip' outlet for those seeking atypical vehicles for the popular call.

With a surge in interest in volatility and the outlet to actual express market views through these products, we find the speculative market splitting its view and funds. Where markets like equities, commodities and exchange rates are struggling for income and healthy price swings; it should come as no surprise that the volatility assets draw greater interest. However, as the focus shifts to these derivative markets, we find that evaluations on the broader financial system are made increasingly on the moves that the derivatives make rather than the underlying. In other words, we find a 'tail wagging the dog' situation. And so, the technical patterns that we find on measures like the VIX or VXST present a different potential. No longer are they simply open to the whiles of what the S&P 500 does, but trading pressure behind the related products can actually charge the volatility measure itself and leverage the very activity in the capital market. We discuss the changes in activity measures and the opportunity it presents for applying technical analysis on new charts in today's Quick Take Video.

To receive John’s analysis directly via email, please SIGN UP HERE.

Should We Apply Technical Analysis to VIX and Volatility?

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES