Stock Market Volatility Jumps Ahead Of Key Fed Rate Decision: A Technical Analysis Of The VIX

The Volatility S&P 500 Index (VIX), tracked by the ProShares Ultra VIX Short Term Futures ETF UVXY, and other tickers, surged up over 8% on Monday, which Benzinga pointed out was likely to happen before the market opened for the week.

The move comes ahead of Federal Reserve’s decision on interest rates, which is set to be announced on June 14 at 2:00 p.m. The Fed’s June decision may be pivotal for the stock market, and CPI data released on Tuesday morning, which showed inflation cooling off, may determine whether the central bank will pause hiking rates. Read more here…

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The VIX Chart: The VIX gapped up to open on Monday and closed near the high-of-day, causing the index to print a bullish kicker candlestick pattern on the daily chart. The candlestick suggests higher prices may come again on Tuesday, although candlesticks are lagging indicators that require the next candle to print for confirmation of the previous one.

  • The move higher caused the VIX to regain the eight-day exponential moving average (EMA) as support, which is bullish for volatility and bearish for the stock market. If the VIX continues higher on Tuesday, the index may find resistance, at least temporarily, at the 21-day EMA.
  • If CPI data shows inflation is coming down and if the Fed pauses hiking rates Wednesday, the VIX is likely to drop. If the index falls under the 13.50 area, where the VIX printed a triple bottom pattern on June 7, June 8 and June 9, volatility could decrease significantly, and the stock market could be in for another run higher.
  • The VIX has resistance above at 15.68 and 17.30 and support below at 14.10 and 12.09.

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Photo: Unspalsh