Financial Iceberg

FINANCIAL ICEBERG

Always consider hidden risks

TECHNICALS

The VIX/Gold Correlation: Higher Volatility Ahead for SP500?
August 09 2016 ( From TradingView , CNN)

If you would like to receive our free daily markets updates, please Sign-Up

The Situation

In these greedy times (good to know that the Fear and Greed Index
from CNN Money is coming from the Fear zone post-Brexit (June 27 2016)
to the Extreme Greed Level now at 84. It is interesting to look the behavior
(correlation) of the VIX and the Gold in relation to the US Dollar (USD-DXY)
and the Mighty SP500 Index.

As shown by the charts below, this correlation tells that the risks have not started to be fully priced into the foreign exchange and stock market yet in terms of volatility: expect more volatility in the US Dollar and SP500 in the next few sessions...

VIX/GOLD correlation getting over the 0.70 zone on August 8 2016 and VIX at 11.50, well below its 200 DMA (Day Moving Average) at 17.07, indicating higher volatility ahead as history suggest...
(See first chart below - Top Panel - Amber Line)

The US Dollar Index is within an Uptrend Channel (See first chart below - Bottom Panel - Uptrend Channel) but most importantly getting back near the resistance zone reached in September 2015. Also quite interesting to observe that we are testing the 50% Fibonacci zone again at 96.56 (from low of 92.62 on August 24 2015 and the high at 100.51 reached on December 2 2015). (See first chart below - Bottom Panel - Thick Red Trendline): Breaking those levels will increase tremendously the Volatility of all US Financials Assets.

For the SP500 index, it started a Bullish Trend from the post-Brexit panic on June 27 2016 to make a Breakout on July 8 2016 (from a Major Resistance Trendline that started back on May 20 2015) (See 2nd chart below - Bottom Panel - Top Red Trendline) to reach new high ever since. The SP500 Index is within a tiny Daily Uptrend Channel since June 27 2016. (See 2nd chart below - Bottom Panel - Uptrend Channel)

So both the US Dollar Index (DXY) and the SP500 are within a technical set up that call for a higher Volatility environment as history suggest according to the VIX/GOLD correlation. Also, the seasonality of the VIX is toward higher level: VIX near seasonal low ahead of most volatile time of the year

The VIX/Gold Correlation: Higher Volatility Ahead for SP500? $SPY, $SPX, $VIX, , $GLD, USDX #Trading #vix #gold #SP500 #moments

VIX ( Top Panel )
CORRELATION
VIX over Gold Correlation ( Middle Panel )
SP500 Index ( Bottom Panel )

VIX ( Top Panel )
CORRELATION
VIX over Gold Correlation ( Middle Panel )
US Dollar Index ( DXY - Bottom Panel )

Financialiceberg.com