Stock Market Volatility Continues To Decrease As Data Points To Economic Slowdown

The Volatility S&P 500 Index VIX, tracked by the ProShares Ultra VIX Short Term Futures ETF UVXY, and other tickers, has plunged over 10% since June 1 after losing critical support at 15, which Benzinga pointed out was a possibility on Monday.

Stock market futures were increasing moderately on Thursday, following an uptick in unemployment claims. The data, released by the U.S. Labor Department suggests a weakening in the economy. Read more here...

The stock market is now pricing in about a 30% chance the Federal Reserve will continue its interest rate hike campaign when it meets June 13 and June 14, but investors appear to be remaining cautious, and fears of a recession persist.

The VIX is now trading at its lowest level since June 2021 but appears set for a bounce, which could bring the S&P 500 slightly lower. An increase in volatility, at least for a short period of time, is likely because the VIX’s relative strength index is measuring in at about 36%.

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The VIX Chart: The VIX bounced slightly on Wednesday before closing near flat. The index has been trading in a downtrend since May 24, making a series of lower highs and lower lows on larger time frames.

• The VIX’s most recent lower high was formed on May 31 at 18.40 and the most recent confirmed lower low was printed at the 16.98 mark the day prior. If the VIX bounces on Thursday, Wednesday’s low-of-day may serve as the next lower low within the pattern.
• If the VIX doesn’t bounce or significantly falls on Thursday, the index will trade sideways, likely settling into a possible inside bar pattern or a bear flag formation. If either of those patterns are recognized, volatility could continue to drop into next week.
• The VIX has resistance above at 14.10 and 15.68 and support below at 12.09 and the psychologically important 10 mark.