VIX drops into major support, as S&P 500 approaches record high​​​​​

VIX downtrend continues, yet bulls could come back back into play as S&P 500 approaching record highs.

VIX downside likely to continue

The Volatility Index has been on the slide over the past two-months, with the index falling back into the five-month low of 26.2, established in June. For the most part, the VIX moves as an inverse of the underlying S&P 500 index, with the grind higher in US stocks providing the VIX with its clear downtrend. Given the current decline back into this 26.2 support level, the ability to break below this threshold will be key in determining whether the downtrend continues. There are certainly significant around the US recovery, election, and stimulus package which could hinder markets, yet the continued upside we have seen should provide further VIX weakness for the time being.

Looking at the S&P 500 itself, the recovery that remains in play has taken the index back towards the record high of 3397. That February peak could provide the kind of level that could see the S&P 500 questioned given the ongoing fears around the global economic outlook. As such, it will be worthwhile watching to see if there is any potential bearish reaction to the 3397 level, where any such downside move would likely bring about speculation of a possible VIX resurgence.

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