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Updates 3:20 PM EST - Thursday 8/20/20
$VIX is still dropping sharply, but $VXN has started to go sideway from the initial drop this morning.
Our recommendation is to tighten stops on your $SPX $NDX IWM short-term bullish positions and think about taking partial profits. There is no guarantee that $VIX $VXN won't start climbing again tomorrow, and cause $SPX $NDX IWM to drop again.
Updates 9:46 AM EST - Thursday 8/20/20
$VIX formed a top at the top edge of its channel. If you look at $VIX hourly chart that we showed you at 12:55 AM today, this means that $VIX is likely to drop back lower in the channel. This is a short term bullish setup for $SPX $NDX IWM.
It does not necessarily mean that $SPX $NDX IWM are ready to surge much higher. But there is a bullish respite. $SPX $NDX IWM are likely to retest their recent highs, but understand that the underlying mood for the bigger picture is transitioning to bearish.
Updates 9:22 AM EST - Thursday 8/20/20
$VIX gapped up overnight and tagged the top of its yellow channel briefly. It pulled back a bit but is climbing back up towards this top edge again.
$SPX $NDX IWM are all gapping down.
There is a high probability of $VIX surging out of the channel by a small amount. Then it may still drop back into the channel, but overall this action will lift $VIX EMA lines upward, preparing for its eventual rise out of the channel.
What this means is some amount of selling will start today. $SPX $NDX IWM are likely to get down to their green support zones to search for new buyers. This is the first line of defense for $SPX $NDX IWM. We expect that $SPX $NDX IWM will find some support here at least initially.
Updates 12:55 AM EST - Thursday 8/20/20
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