Consolidation of volatility (2011-09-07 VIX analysis)

Yesterday Hang Seng Index was well supported at the level of 19,300, and bounced greatly for around 400 points. What an interesting big V shape! So we still have to keep an eye on this level.

Daily chart of Volatility Index (.VIX):















Obviously, with such volatile markets last few days, the index jumped again and closed above all the shown Simple Moving Averages.

The red line and green line represent current short-term trend of the index. Both are moving downward.

Green line gives support to VIX at around 30 while red line resists the index at around 40. This is expected to be the range for VIX (i.e. 30-40).

Yet, MACD crossed its EMA from above last week, which was a bearish cross. And currently they are both plunging. We can anticipate that the VIX could hardly break the red resistant. Consolidation is more likely this time.

But, the index is still above 30. The stock markets won't just move sideways. It is expected that the equity markets would be fluctuating for 1-2% every trading day, so the volatility index won't get above 40 and below 30.

Changes would happen if VIX breaks either side.