The fear index (weekly chart) suggests the market is too complacent. It has flashed a potential pullback.
The CBOE Volatility Index, or VIX, measures the market's expectation of volatility over the next 30 days. It reflects investor sentiment. The VIX is derived from option prices for the S&P 500 index.
The VIX is between its lower blue and red bands, i.e., the market expects little volatility. As a contrarian indicator, this is the complacency region - the market may be tending too much towards the greed side.
Its RSI (middle chart) has moved above its signal line, suggesting that this complacency may be about to be punished. We are monitoring the SPX500 (bottom chart). It's in its bullish channel between the upper blue and red bands. However, the RSI trigger may push it down into its neutral area between the blue bands as the sentiment rebalances.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.