Some thoughts on interpreting signals from a volatility index - VXN

VXN is the volatility index associated with the Nasdaq. As mentioned here in recent days, it landed on the midline of its bigger-picture Bollinger Band on Friday (a few cents under its prior low of April 17). Both lows poked its lower Bollinger Band on the daily chart, and you can see that its current value is actually positive compared with Friday's close. Are there other signals on this chart that give advance notice of the VXN moving up (which may be a bearish signal for the Nasdaq, at least in the short-term if perhaps not longer)? One, look at the moving averages - they splayed out in a "bow tie" from early March and have been extending downward. So, they might be getting ready to revert upward. The faster-moving StochRSI (upper indicator) is showing positive divergence, but the slower indicators (at bottom) aren't responding yet. Also, if you drew a trendline connecting the recent swing lows, it would indicate the VXN may be at or near the bottom of that downward-channel line. (If it did poke a bit lower, it would definitely touch that again, but I don't know that it "has to" do that.) You could also draw a trendline connecting the recent swing highs of the move down. The VXN might want to touch back up to that trendline, or if it moved above that, it might pick up a bit of speed.

I didn't actually draw those trendlines onto this chart, but if you are tracking charts and doing your own chart work, it's something you should already be doing. I look at moving averages and Bollinger Bands on my VIX and VXO charts, but I rely even more on the trendlines I draw onto those charts.

If the VXN moves above and especially if it closes above the high of Friday's candle, then it can be a trigger signal. How strong it would be, and how long it would last, would also depend on the other factors such as have been discussed on the bigger picture charts this weekend. (Including the ChartsEdge weekly forecast for NDX, among other things. Not saying that forecast is set in stone, but it is one of the guideposts we have to work with.)

Again, this isn't to add or take away from any of the discussions about Nasdaq and equities from this weekend. Just a set of comments on how to consider signals coming out of a volatility index like the VXN.