Market Grind - IC News - The New Face Of Volatility

Published: Sun, 03/08/20

Dear

I hope you are having fun with the return to Volatility

No?

Like it or Not Volatility is great for Elliott Wave Analysis because it measures and maps Mass Behavior and Psychology Brilliantly. The 5-3 sequence is a map of this pattern that repeats over time. You may call it the markets secret rhythm. And this rhythm shows up even more clearly on charts when traders get wildly emotional between bouts of Fear and Greed. That is exactly when volatility is on the rise. 2013-2020 will be remembered as the unusual period of lowest market volatility in the history of many markets. But now as we return to Volatility too many investors are neither prepared or ready for the type of markets that follow.

If what you do everyday is mark Elliott Wave counts on Your charts then life just became easier as the 3's and 5's suddenly show up in a very clear and obvious sequence and not hidden in the short term noise. This makes it easier to Pin Point market turning points with high confidence and ride the trends that follow with trend channels. Simple?

Last week I published a chart of the US VIX as it went back to 50% for the first time since 2016 and the 9th time since 1990. The only time we have a reading above it is in Oct-2008. Last night the US VIX made an intraday high near 54. What does this tell us about the state of the markets today. And what would a world above 50 look like? Maybe 25-50 is the new normal for a while. Great news for Elliott Wave traders. But not for everyone else.

Here are some of the posts from this week especially on Volatility. The last month was just the curtain raiser. To Find out Why Read the March'20 issue of the Long Short Report Online.

Rohit Srivastava

Bank nifty leads

The Bank nifty was lethargic till it was not and broke the low made two days ago. the surprise is that Nifty did not follow up today. We call that an inter market divergence which till it holds carries near term bullish potential.

imd 040320

Nasdaq Composite

The Nasdaq maybe starting wave 2 up that could subdivide into A-B-C, but see the big gap down which caused a break of the trendline. The gap maybe the point of recognition that the trend changed and there is a problem as it also coincides with the 66% retracement mark. That maybe the best case scenario on the upside as of now.

nasdaq 040320

Metals Stocks

Metals stocks as a whole either broke the Oct lows or the wave 3 lows canceling out the bullish wave count in most of the cases. The Metals index fell below the 61.8% retracement mark I discussed as well and now the previous low. The alternate wave count is that we are in wave Z down the final wave and now we are sitting on top of this last hope trendline for support. Will it hold?

metals 050320

While it is nice to hope the short term set up is not giving any. Wave Z should develop into a zigzag as did the previous waves. The we are in wave A of Z that should complete as a 5 wave decline and we are only in wave 3 down right for the sector index and wave iv of iii of 3. The next move is v of 3 down before wave 4 develops. Limited upside. So yes metals are out of Value wave till wave Z down completes. Worst case wait for the trendline above to break as a confirmation.

metals 050320b

S&P 500 v/s VIX

US indexes were down more than 3%, however this is part of what has become the normal phenomena nowadays. So does this mean that the next leg of the crash has already started for the US index? Yes and no. The way to answer this question might be to look at the intermarket relationships between the S&P and the US volatility index. If the S&P 500 goes back to near the wave 1 low or even breaks it without a simultaneous bump up in the volatility index beyond 50% then it would be an inter market divergence that would signal that the sell-off is most probably wave B of 2 and wave C of 2 up is still pending. However indeed if wave 3 down has started then it would be much bigger than wave 1 itself which is why you cannot ignore it as you are stocks decline again. The right approach is to presume 1/3 wave and then manage risk along the way. If you thought managing volatility was supposed to be easy think again.

snp 060320

Crude

Crude - closed down for the day, the 20dma is higher at 50.23 but the next wave III of 3 down can start from here itself if deflation takes hold.

crude 050320

CBOE VIX

The US volatility index, the CBOE VIX, touched the 50% mark on Friday and this is the 9th time we have seen this reading since 1997 and the only time we had readings higher than that was during the 2008 stock market crash. So far we are in the range of all previous normal market panics of the last 2 decades.

vix 020320

Euro

A one side rally in Euro we are now at the trendline of the past 3 highs at 1.185, so again this could be at least a near term resistance that might not get surpassed in a giffy. It might aloso be worth considering alternate bearish wave counts if any on the Euro longer term at this point.

euro 030320

Gold Mcx

Gold MCX prices held the 20dma as discussed yesterday and now if this is wave III then III=I is at 44885.

gd040320

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Rohit Srivastava
www.indiacharts.com
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