VIX Index: Early warning to the stock markets but yet to confirm downturn

,

On Thursday, U.S. stocks closed sharply lower amid tech shares sell-off. Nasdaq 100 plunged 5.2%, the largest daily decline since March. S&P 500 slumped 3.5% and the Dow Jones Industrial Average lost 2.8%. The VIX Index, a measure of expected volatility based on S&P 500 index options, rallied 26.5% to a 3-month high of 33.60, the biggest jump since June.

Charts (1)

On Thursday, U.S. stocks closed sharply lower amid tech shares sell-off. Nasdaq 100 plunged 5.2%, the largest daily decline since March. S&P 500 slumped 3.5% and the Dow Jones Industrial Average lost 2.8%. The VIX Index, a measure of expected volatility based on S&P 500 index options, rallied 26.5% to a 3-month high of 33.60, the biggest jump since June.

The three major indices had climbed more than 30% since March, analysts begin to reassess return prospects and it would not be surprised to see investors taking profit or hedging their position, hence causing a surge in VIX. It might still be too soon to conclude a downturn in equity market's trend.

Meanwhile, the closely watched non-farm payrolls report for August will be released (+1.35 million jobs, jobless rate at 9.8% expected), which may bring volatility to the stock market.

On the daily chart, the VIX Index has accelerated to the upside after breaking above a bullish falling wedge pattern. Nevertheless, it remains within a trading range started from April. The level at 25.66 might be considered as the nearest support, while the 1st and 2nd resistance are expected to be located at 44.44 and 50.50 respectively. Alternatively, a break below 25.66 would signal a loss of upside momentum and may trigger a return to the next support at 20.28.


Source: Gain Capital, TradingView


Let's take a look at the daily chart for stock market.

S&P 500 Index: Remain above February high at 3390

On a daily chart, although the index fell from 3584, it is still supported by a rising trend line drawn from April. In addition, the previous historical high at 3390 remains acting as the support level. As long as this key level is not broken, the index may rebound to 3584 before rising to the next resistance level at 3805. Alternatively, a break below 3390 would trigger a return to 3257.


Source: GAIN Capital, TradingView

More from Indices

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.