The VIX index retreated sharply on Friday as American equities bounced back on the first day of the month. The closely watched volatility index ended the week at $26.71, which was the lowest level since June 28th. That price was about 24% below the highest level during the month.
VIX is one of the most closely watched indices on Wall Street. The current version of the index was created by Goldman Sachs and CBOE. The index is a good measure of the level of volatility in the market since it looks at data in the options market.
The VIX index tends to have an inverse correlation with American stocks. The 7% decline that happened on Friday was mostly because American shares started the month in a positive note. The Dow Jones rose by 321 points while the Nasdaq 100 rose by 100 points.
Now, it seems like the sell-off is not over yet considering that futures tied to the Dow Jones, Nasdaq 100, and S&P 500 have all dropped sharply. Similarly, futures tied to the VIX index have risen by more than 1.20% to the current $28.13. The fear and greed index, which is an important aggregate, remains at the extreme fear level.
The VIX will have an important month in July. For one, the US will publish jobs data on Friday. These numbers are expected to show that the labor market softened in June as business confidence dropped. The Fed will also deliver another 0.75% rate hike this month. Most importantly, companies will start publishing their Q2 results this month.
The four-hour chart shows that the VIX index has had a strong bearish trend in the past few days. The index crossed the important support level at $27.73, which was the lowest level on June 28th. It remains below the 25-day and 50-day moving averages while the MACD has moved below the neutral point.
Therefore, the VIX will likely continue falling in the coming days as bears target the next key support at $25. This view is in line with my previous VIX prediction. The trend-defining point will be at 27.73.
This post was last modified on Jul 04, 2022, 06:23 BST 06:23