$VIX sharply moved lower during the past week showing that investors are having more confidence in this long-term uptrend and the recent "fear" of a deeper correction is now in the past. Even sudden geopolitical events only moderately affected the market as it was evident this past Friday and it was quickly absorbed showing how resilient is this equity market. $VIX spiked above the 200-day moving average but finished the day below that as fear dissipated during Friday.
The hourly chart below shows SPY, the S&P 500 ETF with ATR (Average True Range) in the indicator window. ATR is a volatility indicator calculated from the True Range which uses absolute price changes. ATR is not a directional indicator it reflects the degree of interest or disinterest in a price move. Strong moves in either direction are often accompanied with large True Ranges. An increase in ATR can show strong buying or selling pressure. As you can see on the chart below Friday’s sharp decline took place with increased ATR on the hourly chart.
The chart below shows VIX with a couple of 200-day Bollinger Bands. The difference is that the bands are calculated with different standard deviations, namely 2, 3 and 4 standard deviations. From the chart below my guess is that VIX is going to penetrate thru the 3 standard deviation band possibly the 4 standard deviation band which is barely visible on the chart (green). So VIX could go up to the 22-ish range.
I am posting these tables for my reference. The first table shows VIX call options with March expiration and the second table shows VIX call options with July expiration. As you can see the front month and the back moth shows different volatility skews. Volatility skew means that the Implied Volatility changes with the change in strike prices. The front month shows the Volatility Smile and the back month shows Reverse Skew.
VXX, the VIX Short--Term Futures ETN started to outperform the S&P 500 index, SPX this year. Both of them have been moving higher from the second half of February as you can see on the daily chart below. Below the chart you can see that VXX out performs VIX too. The relative strength of VXX suggest that there could be a volatility spike in the near future.
The daily cahrt below shows VIX with the 200-period Bollinger Bands. As you can see on the chart, VIX ususally turned back trom the upper Bollinger Band during the past year and a half. It seems that the upper Bollinger Band is a strong resistance. It would mean that SPY the S&P 500 ETF would soon find support.