October 14, 2018
Momentum Surge in Volatility
Looking at the CBOE perceived risk data as well as the long volatility futures ETFs (bearish investment vehicles) across the four major indices there is a momentum surge. Our chart on the left of the 3Xbull S&P ETF gives a clear picture of two failed tops at all-time historical highs followed by breakdowns. Following January peak, the February/April low pivoted when %BB-Oscillator was a divergent overbought long volatility ETF “SPXU”– right-hand Our Bollinger band oscillator is not yet at an extreme suggesting more decline to come.
What else is clear is %BB SPXU never moved above .382 during bullish trends. Looking back over the complete history of this bear ETF %BB-Osc only moved above .382 when the market moved into consolidation at least or a meaningful correction. With that being the context of the market now on an I-T basis, expect more decline.
Bottom line is our measures on V have surged past a point that implies follow through or lower prices for the major averages.