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VIX Approaching Historic Lows As US Jobs Data Lift S&P 500

The S&P 500 index has surged higher after a stellar US jobs report this afternoon. This scenario has continued to put the VIX under pressure as it suffers its 4th straight losing session. Today, the VIX has dipped 3.46% on news that the US government has reached loan agreements with five airlines under the CARES Act. This information is providing a fresh fillip to airline stocks listed on the S&P 500 index. 

A slew of positive news this week has served to suppress the Volatility Index:

 – Pfizer coronavirus vaccine candidate’s clinical trial data

 – upbeat ISM Manufacturing PMI

 -surging retail sales and consumer confidence 

 – today’s NFP report

US President Trump has just concluded a press conference where he doubled down on specifics of the jobs numbers, which show record employment for African-Americans, Hispanics and workers without a high school diploma, further contributing to the downtrend on the VIX. 

However, rising coronavirus cases may be a significant factor to help the VIX stop the rot, depending on how much markets use this factor to weigh on further trade action. 

Technical Outlook for VIX

The VIX is challenging the support formed by the lows of 27 February, 8 May, 20 May 2020 at the 27.90 price level. The daily candle has retraced from the intraday lows, forming a hammer in the process. The completion of the candle will provide further information as to further price movement.

A breakdown of the 27.8 support level could extend the downtrending price action down to the 24.6 support line (16 February and 4 June lows). The support at 19.9 could be the next logical target if the decline extends below the 24.6 price level.

On the flip side, recovery of the VIX could occur if concerns of the rising coronavirus cases plague the market, allowing price to advance towards 37.4 (highs of 13 May and 16 June 2020). Advance towards 40.1 or 43.9 could be on the cards if the US markets resume their selloff.

The market response to the coronavirus cases in July would determine price action on the VIX going forward. While some states in the US are shutting down bars and gyms, some are leaving beaches open for revelers to enjoy the 244th Independence Day celebration. What the coronavirus numbers will look like after this weekend and the market response to it all would determine the fundamental play for the VIX.

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VIX Daily Chart

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