Classic EUPHORIA Market in the Making!

VIX Overlay DOW JONES

With the DOW & SP500 closing in their respective highs, no one dare to declare that the cautiously steady rise of stock market prices have given some analyst / traders including main street investors at a four (4) way cross road, between uncertainty, indecision, reluctance and anxiety rolled into one. Such prices are indeed at their highs. And not a lot of market participants would want to be set on the high side of the market.

With these current price levels, anxiety has been more prominent market sentiments with 'Volatility Index' (VIX) on its lowest levels at the moment. While momentum gains are reflected correspondingly with the DOW's prices at their highest levels giving a signal of positive breath contrary to some analyst continued call for a major decline. This can only happen after the fact. And the VIX is quite the more favored tool to measure the market' price action, but not enough to necessarily push investors to get in on these high levels and missing out the probability of a continued rally in the making. Or it is already one!

Classic EUPHORIA Market in the Making!

Euro & USD Reacts In Counter Trend Direction

At the back of ECB President Mario Draghi's comments that the ECB is flexible enough to sufficiently address QE whenever necessary has provided the initial market move for the EURO back below the 1.1300 and currently @1.1245 to this writing.

Likewise, supporting the actual session high for the USD has been the lower than expected Jobless claims that has been favoring job sustainability. An easy way for a double whammy for a USD rally has had bull traders adding increased interest in moving the USD price recovery at a pace contrary to its recent decline at the middle of the month ending the 14th of October. However, a cautious approach should always be in check as the monthly configuration on the USD could change as we move forward to the end of the month's trading.

This price recovery of the US Dollar Index (DXY) is the start of a renewed recovery for as long as momentum can be maintained: backed by an increase in volumes near the closing of the week. The 96.05 - 96.50 basis point range levels would be the first line of resistance to hurdle for as long as no major pullbacks would occur towards the end of the week's trading session.

And with that said, whenever the trade set-up plays within this conditions, and with the EURUSD failing to make a stronger come back towards its previous high nearest to 1.1515/20 levels, the probability of a near term decline called dated 9.30.2015 is in the making. As the market volatility turns direction for now closer on a weekly basis as reflected by its price action. Current low for the session is @1.1180 and hawkish market sentiments on the Euro prevails.

VIX TURNS MARKET DIRECTION

 

The stock market indices' ability to recover reflected better from price action behavior which have been proven to show how bulls have retaken the price levels back to where it started. Both the Dow, USD (DXY) and the SP500 above their respective benchmarks @17000, @93.80 basis point and @2000 clearly shows the reflection of the Volatility Index as a useful trading gauge for trend direction.

US DOLLAR INDEX & DOW JONES

Although, the USD price recovery came late into the picture, both the DOW and SP500 had an excellent run staying above these marked levels turning into positive territory. Sentiments have similar reactions from positive fundamentals on jobless claims towards the middle of the European trading session. 

Volatility Index (VIX)

A keen observation and price market behavior comparing the VIX and the two major indexes have shown the probable turning point where prices would turn. Noting that such increase in volatility on a rapid downward price direction can be seen as compared with the inverse of such direction higher with a considerable lower price volatility, as shown on the two images above.

Each point of reference on the VIX has to coincide with the projected price target of the indices. An example of which shows where the low of the DXY, DOW prices corresponds to the high of the Volatility Index after coming from the market consolidation (Trading range) and would eventually turn into a break-out then a directional trend in the making. 

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