VIX Futures Apathetic

Most of you know that the VIX moves opposite the market, if there's fear in the market of a sell-off, VIX futures are bid for protection, if there's complacency VIX futures are not bid, when this happens the assumption is (by traders) that higher prices are coming or will continue.

For us though there are two different forms of VIX information, the price itself which is all most people see and the underlying trade which is in my opinion, a far better indication.

For the VIX piece to fit the puzzle, first we have to understand what expectations are which are based on a number of individual data points, not a guess or gut feel and expectations are still for the market /  IWM (I use this as a standard because of its resistance area that would represent a breakthrough and because it's a leader of risk on moves) to make a move higher.

IWM 5 and 10 min charts as well as numerous other market averages have been pushing this way.

So does VIX data confirm?

First the VXX short term VIX Futures .

 Here we see 3C weaker than price, this happened this week when they banged the close, first VXX futures saw 3C lagging which was mentioned in a market update hours earlier, then a positive divegrence developed in the market just before the close and they ran up the market in to the close using lower VIX prices.

 Our big picture expectations are the exact opposite and when looking at a 4 hour chart of VXX, it is the exact opposite so that's confirmation of the big picture.

There are several different forms of VIX buy/sell signals using Bollinger Bands, for instance the orange arrow shows VIX prices outside the band and then closing inside, some take that as a sell VIX/Buy the market signal. I prefer a 2-day candle, the first above the band on a close and the second fails to hold and closes inside the band (yellow arrow then red), the last time it happened the VIX sold off. So far today we have the same signal suggesting (if it closes like this), that the VIX sells off and the market bounces which is in line with out expectations.

This is the most important to me, it's the 15 minute ACTUAL VIX futures chart and as mentioned, underlying trade is apathetic by way of a leading negative divegrence. To me this suggests that smart money knows something that most don't, especially with protection not being aggressively bid in to an unsure weekend.

As far as I can see, the VIX is confirming both expectations, the strategic and tactical.