Fed Decision done…Now where do we go before end of the year? The Fed announcement was last week on a Wednesday. We posted an article at the beginning of the week (Article) where we showed how all the Global markets were at major support/resistances. It was key to see where price closed by the end of the week.
The only big news was the US Fed rate decision so MAYBE that was going to be the key announcement that influenced all Global markets. Either way, we could not determine anything on Wed when the announcement was made because we need to wait for the price to close at the end of the week. The weekly charts gives the trader the long term project for the market being analyzed.
For the entire year, we have used the CBOE Market Volatility Index to gauge where the US stock markets were going to go on a weekly basis. We have continuously posted social media articles, blogs, newsletters, etc for our entire thought process on using it. No other instrument this year has been able to forecast better than the VIX. We have looked at bonds, commodities, ETF, indexes, global stock markets, etc.
As a result, we will look towards the $VIX again to predict the state of the US stock markets. We will continue to do this until the $VIX does not do it’s job!
Below is the weekly chart provided by Thinkorswim for the $VIX. There has been 2 trading zones for the entire year. Zone 1 is from 12.17 to 20.76 and Zone 2 is 20.76 to 32.10. 2 weeks ago, the VIX broke the resistance from Zone 1 and closed in Zone 2. As a result, the probabilities are high to bounce in this zone until it breaks out of it. It can break back into Zone 1 or break the resistance at 32.10 to start a trend to retest the high at 54.
Last week, we closed right at support of Zone 2, the boundary condition. Will we break it or bounce of it? We need to know this with high probability. If we break the support then we go back into Zone 1 and the US stock markets start to go up and close positive by end of the year. If we hold it, the US markets consolidate with a bearish probability.
Let’s look at the Daily time frame to see if we can get some prediction from that chart. Below is the daily chart for the VIX provided by Thinkorswim from TD Ameritrade.
The support on weekly time frame is the resistance on the daily time frame. This makes things even more interesting. The level is a MAJOR level controlling the future of the instrument. However, one chart is reading it to be a support and downward move from last week could have been a pull back to go bullish. The other chart is reading it to be a resistance and the upward movement could have been a pull back to go bearish. We can monitor the daily time frame to see what will happen now!
If price closes above the cloud, the stock market will have a high probability of going lower. If price closes below the cloud, the stock market will have a high probability of going higher.
Stay tuned…the markets are going to get interesting. This is very exciting! Where else can you wake up and simulate your mind every day!
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