VXX Short Term VIX Futures

Generally speaking, these move opposite the market, however over the last several months they have shown more resilience than they should, meaning the heavy weight market participants have been picking up protection from a move to the downside by bidding up VIX futures.

We can look at the different 3C charts and almost see what we can expect from a market bounce, where it's capped and what the market downside really looks like.

 The VXX moving up puts negative pressure on the market, the VIX moving down allows the market breathing room to move up, this is a 1 min chart. Of course the longer the timeframe, the stronger the underlying flows, the bigger the divergences, the stronger the flows. However we also can see more or less what the short term, intermediate and longer term picture for the market looks like.

 The 2 min above and 3 min below both show short term distribution, helpful for the market.

 3 min

The 5 min above is where it starts to cross over to a more neutral stance, meaning the distribution is there and it will move the market, but there's a limit to it.

By the 10 min chart we have an in line status, there's no divergence, the distribution didn't make it here and this caps the market to some degree, in other words it's highly unlikely the market can recover to its former glory.

It just gets worse from there, looking at a 30 min, we can see the trend toward bidding protection for some time, this is how we know that market has been in trouble for some time and not just Friday, it also tells us that this is large trouble as we rarely ever see this kind of accumulation and failure to move with the SPX correlation, there's real demand here for a real reason. I expect the real downside to be horrendous.