A week ago, when the markets collapsed and the gurus predicted a crash was imminent, we published The Market Will Not Move 50% Lower. We even looked at our leading indicators and concluded that volatility indices suggest a short-term bounce in markets is underway. In this short post, we’re sharing an update on the state of the volatility indices, along with some quotes and charts from our most recent market analysis that we’ve shared with premium members in our Trade Alerts service.
In our Trade Alerts service we offer a number of proprietary methods. One is an algorithm that flashes highly accurate signals for trading the S&P 500, another is a method of reading volatility indices to predict the direction of the markets (short to medium term focused).
Here’s what we observed in this weekend’s market analysis:
“VIX has a very similar setup to the Nasdaq Volatility Index. We really like the double top pattern. Also keep in mind that our belief of a bottom formation in markets stemmed primarily from the fact that VIX peaked at just below 35 points on September 28, green arrow on the following chart. It worked like a clock.”
Based on our volatility index analysis, we concluded the following:
- Volatility indices again led us very well in our reading of markets, despite very aggressive bottoming in markets that took a full month.
- We really like the settings in volatility indices, they confirm that a bottom has been reached in the markets.
- Therefore, we expect markets to resolve higher.
It gets really interesting when we look at our tradable S&P 500 chart, also an important part of our Trade Alerts weekend warnings.
The 3x bullish S&P 500 ETF chart is confirming a massive reversal. Below is the short-term SPXL chart that makes the point.
Here’s a quote from our weekend analysis:
The recent lows seem solid. This means we can start adding the first mapping we initiated on Tuesday. Ideally, we’ll add two more allocations next week, on the dips, to scale up our allocation in a controlled manner. We will try to buy the dip based on the levels we get from our algorithm (the same price points we release in our ‘daily Algo Alert’).
If we combine our volatility index values with the information we get from our algorithm, we conclude that a really ‘juicy’ opportunity is brewing in markets with a high probability of a bullish impulse occurring in the very short term.
Since this happens at critical support on the daily chart, we believe markets will end higher and a year-end rally is very likely.