Historic VIX Drop Signals What's Coming Next

1) GOLD – Gold Volatility (GVZ) finally stopped going vertical, so Gold stopped going down with GVZ cratering from 46 to 37 day-over-day.  That’s a big volatility drop.  This got Gold to break out back above the top of my TREND Signal Level of $4,861.  Could it come back into play?  Yes.  But, given the wide dispersion of volatility in gold, I have the daily TRADE range top level at $5,520.  That signal is above the all-time high.  So could we see gold just shoot right back up there?  The math says we shouldn’t be surprised if it did.  A break back below $4,666 and we’d see TREND broken again.  Regardless, what we should expect is volatility while gold finds its footing.  Silver is still inside TREND range ($79.65 – $88.87), currently trading at $88.17.  Its daily TRADE range is NOT signaling a return back to highs…not yet anyway…but the top of its TRADE range is way up at $113.60.  Could it go there?  Mathematically, yes.  Is it probable?  Well, silver volatility is still a sky-high 85, and that can be a repellent for flow until it settles down some.  There is a real potential to see Silver move toward $105.  How it acts there will be very telling.

2) OIL – Still holding its TREND breakout after yesterday’s -5.16% drop in WTIC (West Texas Intermediate).  I commented last week that we should not be surprised if we saw oil test trend of around $60.  It hit $61.18 yesterday.  TREND range is $59.69 - $61.87, and currently trading at $62.59…above the top end of TREND range making it still bullish, or an upward bias.  That’s not what consumers really want right now, higher oil prices, but that is often what we get with growth accelerating.

3) VIX – VIX had an intraday drop of over 3 points yesterday.  That has only happened 3 times (ever) when the S&P 500 has been within 1% of an all-time high.  The last, most recent time was the 2021 Bull Market.  VIX trade range is quite wide, signaling that the volatility of volatility (VVIX) is still a bit elevated.  VVIX is bearish (downward bias) trend with its daily trade range at 83.04-122. That’s wide.  It wouldn’t be surprising if at some time over the next week VVIX were to test its trend high of 112.79.  That, of course, would cause an increase in put buying by the crowd, increasing implied Volatility PREMIUMS.  The SPY (S&P 500 proxy) implied volatility premium is currently at 86%, up from just 53% one month ago.  Rising premiums suggest rising hedging, which tends to keep a market from falling over too hard.