Options, Stocks and Forex

Vix as an Options Indication

This Year in Review - The first candlestick which was printed on Jan 3rd 2017 to now has several cycles of note.  The first is the consolidation between 10.5 and 14.5, which made up a majority of the early winter to late spring.  The cycles I point out "7 day cycle low and 5 day cycle low" are highlighted to point out how the price tightens so much that when it springs it reaches a new high for that cycle.

The cycle on 3/29 for that candle the range itself was a mere 0.67 with a low of 11.3 it then went to 16.22 on April 13th, 7 trading sessions later.  Hitting the barrier I shaded in purple was a real hurdle up until August 10th.

The same type of action happened when the Vix hit its low 9.56 for a very tight 0.56 range on May 9th, then it shot up to its cycle high of 16.3.

Everyday up until 8/8/2017 the CBOE Vix Index averaged [Red Moving Average sliding across the screen] on some level below $11.31 its mostly a bearish indication.  This 100-period simple moving average acted as resistance or tended to indicate that it won't be able to trade higher than it for most days of this year.

But! recent break outs and its follow have added some enthusiasm where lows are being bought and highs are holding strength.  For example, the most recent white pointing up arrow on 8/16 points out price held above the moving average where it begins to act as support.  

New Trading Range minor peaks at 20 or 23?

From October of 2016 to now the 16 range technically acted as a barrier that was only over taken in the middle of October and the week leading into the election where it topped out on 11/4 at 22.96.  

When you take a closer look, the cycle has a lot more enthusiasm to it.  That is, panic can overtake the collective sentiment very quickly and the trend dominators are more apparent

The Stock Market

How the market behaves in between each of the three bands is what is in scope.  The green line [mean] in focus now.  Because it is at 2463.23 I would like to observe that it is currently switching direction, whereas most of the year it was sloping higher and pointing up, it is now starting to turn the corner and price is dragging it down.  So, for this chart, the time when price punctured the lower band, demand was so intense that it either did not fully close below the lower band OR it stayed there just momentarily before resumption.  Normally when price cuts through the higher band or lower band, it signals further action and confirmation of the said move.  In this case it acts as a trap for any of the bears hoping to drive price lower.  Here, it traded as if there were three bear traps, price was only reacting to the institutional demand and order flow at those prices.  

The question is how many more days could it continue trading below the lower purple band before it snaps back, the market as a collective will give an answer, my hunch is that it can last for longer than a week, because that is the surprise that would upset everyone wishing that there would not be a negative headline; also we are approaching the worst time in terms of seasonality to be bullish on the market.  

The Dollar

The lower shadow on each of these daily time frame candlesticks have the signature of slightly stronger demand.  The green shaded rectangle is very critical for any currency speculator attempting to drive the dollar into a weaker state, which since earlier in this month has held nicely with 4 [noted with green arrows on the chart] lower highs.  On some of my earlier posts you can tell that I was looking for a powerful resist point at 12,000 and thats just what we got.  I don't format my trendline [brown] to extend out to infinity but in this case I felt it was OK because it shows how this projected trendline would intersect with the 12,070 and 12,103 zones and it is also paired closely with the 50 period moving average and the descending black dotted trendline 

Summing up these factors

• The previous sellers were hitting it hard at 12,070 and 12,103
• The simple Moving Average is trending at 12, 050 est.
• Trendline intersects with this area at 12,050

The dollar index may be able to absorb any information pending from Central Bank Meetings in the next days and weeks, and I am sure any communications re: Fed Policy will dictate any further demand or lack of demand for US Dollars.