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Wednesday, May 20, 2020

The VIX Unfilled Gap and Fibonacci 78.6% Retrace Marker

The VIX is an important social mood measuring tool in my opinion.  It shows long periods of calm with a low VIX and heightened panic with massive spikes.

The Volatility index always seems to have a way of filling its gaps. There is a huge open gap on the VIX from 18.2 to 21. So far the print low on the recovery has been 26. What would it take for the VIX to fill that gap?

The market would probably have to retrace to the Fibonacci 78.6% mark for the VIX to collapse back toward 20.  If the VIX moves into its open gap, you'll probably see a quick spike print on the VIX that quickly closes the gap and moves above 20 again.
A closer look:
If the Wilshire does not fulfill the target range (and triple zigzag count) I set of 30,421 to 30,475 in the manner I laid out today (or if wave (3) doesn't start down like right away), I'll have to start looking at how the alternate count of wave (2) may play out.

So far, if today was the peak of [i] of C of (2), it is about 50% the size of [i] of A.  The VIX has been diverging a bit lately so we may see another spike for a wave [ii] pullback.  The VIX is still elevated so big price moves are still occurring frequently.

Since the Wilshire is trading above its Fibonacci 61.8% marker we have to see that it might go toward the 78.6% marker.

Wilshire 31,907 = 78.6%
Wilshire 31,825 = Wave C = 1/2 of Wave A

June 3rd is the target date for the (2) peak based on an equal rate of ascent of A.  This would make wave C = 1/2 the time and price of A.  This would align with the 78.6% Fib and also close all the open Wilshire gaps down on the chart less the one at the top which should remain open if this is wave (2).  In this scenario, the VIX would probably challenge its open gap and maybe close it with a funny-looking ghost print.
On the daily it would look like this with the thick blue line being the target range I mentioned above.
If this occurs it will indeed have been an epic wave (2) in such a short amount of time and social mood will have had a breather. But then reality will rear its ugly head again.

Everything is possible. I never thought 36 million would go unemployed nearly at once but it happened.

Now, I haven't yet changed my primary count to this count. Its just that I am always looking for alternate counts so that your can never be too surprised when things do what they do. I was curious about the VIX chart and pondered a scenario in which its open gap gets challenged.




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