Thursday afternoon, the VIX volatility index closed right at its two-year blue downtrend line.
This blue line has been the absolute end of all sell-offs for the past two years. If the VIX crosses this line it could easily move into the black channel which would be an unfriendly place for the stock market. The VIX itself over the past two years has basically been a huge declining wedge which is a pattern that normally breaks out feverishly to the topside before the declining line meets the horizontal base line. Since we are so close to that situation here, investors are concerned that there might not still be one more oscillation inside the narrowing point of this wedge.
Anything could happen here, the blue line has actually been the point where the market has been rescued from big sell-offs over the past two years. Maybe it will happen again next week, or it might not. My gut feeling is that for the blue line to hold, there would have to be substantial easing of the geopolitical risks that are escalating currently.
Trade well my friends
Alan
