Always consider hidden risks
SP500 Financials HVol: Capitulation Wave ?
February 4 ( From Tradingview)
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Rising Historical Volatility ( HVol ) on SP500 Financial Sector ( SRFI ) is most of
the time indicative of a market trend change or acceleration of previous trend.
And falling HVol is usually associated in a bull trend or trendless market.
And rising HVol is usually associated in a bear trend or trendless market.
HVOL did reached on December 1 2015 a low level last seen back in mid-August
2015 when we had a correction trade pattern in SRFI. But what is interesting, it is that HVol was getting
higher after a test of the resistance from a downtrend channel with Financials.
( See 1st chart below - Red Trendlines - Ellipses) SP500 Financial Sector ( SRFI ) Peaked at 344.90 on July 23rd.
In fact, when we broke a Rising Wedge Pattern on August 20 2015 at 329.80 and also the 200 DMA ( Day Moving Average - Green Line on the chart below ) then at 329.73 on SRFI , game was over on a short term basis and then reached then the panic selling level on August 24 at 299.11.
Since December 1 til now, we had an increase in the Historical Volatility on SP500 Financial Sector ( SRFI ) with a bearish trend in Financials since... Closing price on SRFI on February 3 was at 283.47.
SP500 Financial Sector ( SRFI ) also broke on January 15 a major support trendline that started since February 2 2015 then at 292.22. On the strong correction of January 20, it did kissed and rebound from the bottom previously reached on February 3 2014. ( See Chart below, Top Panel Orange Trendline )
Historical Volatility ( HVol ) on SP500 Financial Sector ( SRFI ) is spiking as we did see in the previous correction like in August 2015 and the second highest reading since September 2013. That major correction since December 2015 have been quite orderly, a very unusual behavior if we take into account the Volatility reached in the High Yield Corporate Bonds.
But the most interesting technical factor is that the Historical Volatility ( HVol ) on SP500 Financial Sector
( SRFI ) is spiking at a time that we retested the previous low reached back in February 2014 on SRFI then at the 276.34 level. A tiny form of capitulation we have seen yesterday on Financials. Bulls need to protect that 276 handle zone at all costs from now on... ( See Chart below, Top Panel - Amber Trendline )
SP500 Financials HVol: Capitulation Wave ? $SPY, $XLF
#Trading #volatility #SP500 #xlf
Top Panel : SP500 Financials ( SRFI - Candles )
SRFI 50 DMA ( Red Line )
SRFI 200 DMA ( Green Line )
Bottom Panel : Historical Volatility ( MA10 - Blue Line )