Updated: Aug 29, 2019
Unlike historical volatility, which basically looks back on the volatility of the asset prices in the past, implied volatility tends to be forward looking. Specifically, the implied S&P 500 Implied Volatility Index (VIX) depicts the 30-day forward looking volatility of SPX derived from the current S&P 500 index options. It provides a better and more accurate measure of current market risks as well as investment sentiments. This indicator is often referred to by the press and media as the fear indicator. The escalation of U.S. and China trade war, inversion of the US yield curve, uncertainties in global growth and various geopolitical events have resulted in the VIX Index rising once again. In fact, the 10-week and 30-week moving averages at 16.06 and 15.12, respectively have recently generated a golden cross buy signal and both trends are starting to turn higher. The ability of VIX to find key support along 11.03-11.69 corresponding to its 2019 lows now warn of a retest of key resistance along the mid-to-high 20s (23-27). A breakout here can lead to the low-to-mid 30s (32-36) and possibly as high as 50-53 to retest its 2015/2018 highs. On the downside, key support is 15-16 or the 10-wk/30-wk moving averages and then pivotal support at 10-12 corresponding to the 2013-2019 lows.
Chart courtesy of StockCharts.com