Technical Analysis: Why the VIX is on its way to 150 and the SPX is on its way to <2000
Alright autists, this post is only for those of you who were around for the crash in Feb/March 2020. The rest of you can go bag hold more RBLX and GME shares.
So one of the big warning signs of a massive crash is a string of hindenburg omen, we had it right prior to the crash in Feb/March of 2020. Again, this is not the a definitive warning, as it has given many false positives such as in March 2021, and Nov 2020 Aug 2020, and May 2020. But there is more.
Another thing to look at is breath of the market. We know that the breadth of the market is horrible, with something like 40% of NASDAQ down 50% for 2021. The entire stock market is held up by Microsoft, Apple, Amazon, Alphabet and Facebook. The only times breadth was this terrible was in 2000, Nov 2018, Feb 2020 and now in Jan 2022.
The final nail in the coffin is the VIX. In Feb 2020, you had a falling wedge in the VIX followed by a breakout before spiking to close to 80 in March.
A similar setup is happening today. Then there is the narrative, the market kept ignoring Covid which was baffling institutional investors going into Feb 2020, despite the rapid spread and the original variant having something like a 2-3% mortality rate. The same thing is happening today. The Fed signaled it was going to end QE and hike rates, but the market largely shrugged it off for a full month. Meanwhile China, the second largest economy where 1/3 of GDP is dependent on housing construction is rolling over and Russia is trying to invade Ukraine (which will send oil to $100+). Investors are ignoring all of this information.
All of this is pointing towards a massive crash in the next couple of months. but you may counter, the fed won't let markets crash. If it tanks 10%, the fed will cave and give up on rate hikes and will start QE again and pump this market up like its 2020 again. The problem with this argument is that it makes a large assumption that the rise in stock market shares are driven by the fed, when there is a strong argument that it is in fact driven by the rise of passive investing (look into Mike Green if you want more analysis) on this and as a result is resembling a fractal that goes up in an exponential manner, with crazy deep flash crashes in between. This means it could suddenly crash 50% in 2 weeks and there would be nothing to stop it, because it is possible fed QE just creates bank reserves (which does nothing) and the only role the fed plays is in confidence in the market, and it can easily be destroyed like in March 2020, when the market crashed 15%, the fed then dropped rates to 0% and the market proceeded to crash more.
TLDR: I got Feb/March VIX 30-60 calls.
Submitted January 14, 2022 at 06:40PM by vegaseller
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