On May 27, the VIX (INDEX:VIX), for a second consecutive session, settled below prior support at 11.52 from a bullish window opened on March 15, 2013. This I have long thought should usher in a new period of generally moderate but steady equity gains for a year to 18 months. Since May 27 close, the Standard & Poor 500 Index (CME:SPU14) has advanced 3.6% into yesterday’s close, slightly outpacing a moderate rate advance.
A look to recent VIX activity may help shape expectations further. A new multi-year low in the VIX was registered on July 3. This low to 10.28 had not been seen since early ’07, and even then, only briefly did the VIX trade in that region. That July 3 session created a ‘bullish inverted hammer’ and the index gapped higher the following session, creating a first of three bullish windows.
An opening high reached only 4 sessions later at 13.22-.23 on July 10 was 28% higher, finding resistance at the 100 day moving average. That morning I had written that traders should not get over excited about the present prospects for a VIX jump; VIX; Don’t Bet Everyone Else Freaks-Out.