A Look At Stock Market Volatility Amid Debt Ceiling Deal, Ahead Of Fed's Interest Rate Decision

The CBOE Volatility Index (VIX) closed 2.73% lower on Friday ahead of news over the weekend that President Joe Biden and House Speaker Kevin McCarthy reached a tentative deal to increase the debt ceiling.

While the news is bullish, traders and investors will be watching closely for indications of whether the Federal Reserve will apply another rate hike on June 14, when the Fed releases its monthly meeting minutes. Another interest rate increase could pressure the markets lower and amplify volatility.

The VIX is used to measure the expectation of near-term volatility in the stock market, and volatility is used to gauge market sentiment, specifically the level of fear that exists in the S&P 500.

Traders wishing to trade the volatility in the stock market can use MIAX’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index (SPIKE), track expected volatility in the SPDR S&P 500 SPY over the next 30 days.

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The VIX Chart: Although VIX dropped substantially Friday, it didn’t negate the uptrend it reversed into on May 19, when the index formed a bullish triple bottom pattern, when paired with similar price action on April 28 and May 3. If the VIX trades higher on Tuesday, Friday’s low-of-day, at the $17.27 level, will mark the next higher low within the pattern.

• The VIX lost support at the 50-day simple moving average (SMA) Friday, which is bearish. The index also printed a bearish Marubozu candlestick, which suggests lower prices could be on the horizon.
• If the VIX continues to fall on Tuesday, the eight-day exponential moving average (EMA) could cross under the 28-day EMA, which could generate momentum to the downside. If the VIX crawls back up above the 50-day SMA and trends higher, it’s likely to find resistance at the 200-day SMA, at least for a short period of time.
• The VIX has resistance above at $19.43 and $21.79 and support below at $17.71 and $15.68.

Read Next: A Look At The SPY Heading Into The Week With Biden's Tentative Debt Ceiling Deal In Focus