So we finally got the monster sell day and the VIX promptly flies back up into the range.
With the market so short, we are always on watch for a powerful move back up. After-all we are firmly still in an uptrend.
On the flip side, a few more days of selling would not surprise us at all either.
Structural Analysis:
It's really important to detail structure on day's like this, because there were some huge tell tail signals that tipped off the astute trader to take advantage of the fierce downtrend.
1) As we noted, VIX was at range lows extreme, and had been low like this for an extended period of time. I read on Thursday that the last 40 sessions were the tightest in history. As the rule goes, the tighter the action prior to a breakout, the bigger the break -- and we were on watch for this.
2) Upon the market open, TICK exhibited extreme readings of almost -1800. Yes, almost -1800. Readings like that simply do not come along very often and when that many sell programs hit the tape, then a short bias is in play. Especially if the readings and price are not firmly rejected relatively quickly. The market just balanced and then proceeded lower.
3) After the session's 1st hour SPY was 4x relative volume. Other majors over 3x as well. This volume was the fuel for a major move.
4) A/D sediment extreme -2500+
5) Not even close to a +600 reading in TICK until the final hour. This is as skewed as it can get.
6) Rocket ship VIX: Grinding higher the whole session and ending up a whopping 40%
7) The price action itself was grinding lower. Compare this to liquidation movement that is prone to over extension and reversal. Price did not liquidate lower until the last hour.
Now for some slides:
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