Regular readers know I pay a lot of attention to VIX and XIV. They frequently have the right read on the market and so I have learned to ignore them at my peril. I find technical indicators on these two vehicles to be a great confirmation of stock index positioning.
VIX has been low (ie closing under long & medium term pivots) since 11/8. VIX even dipped into the 10s which is quite rare. This helped confirm "long and strong" after the election regardless of one's political views or fundamental prognostications.
But even this doesn't capture what has been going on in XIV, an inverse ETF related to short term VIX futures. This is a good article on how it all works, but for now I just want to put up a few charts.
Bottom line - All timeframes on XIV are quite stretched. XIV has already reached 1HR1 and may tag YR1 soon. While this has been an incredible run, I'll be watching for any reaction from these levels: 1HR1 56.82 and especially YR1 59.86. If XIV stops going up, stocks are likely sideways at best and more likely down.
The only bar that compares to the current bar was 6/2014, which was quickly followed by a -48% drop.
This timeframe is also fully overbought, and has closed outside the Bollinger band for 7 of the last 9 weeks. This is an incredible run, but at the point where it should slow down at least and more likely drop.
XIV W - long term pivots
Already above 1HR1, the first asset class I know of to reach long term resistance already. YR1 within reach.