When VIX is rising and the S&P bounces, resistance levels are more likely to hold. When the S&P is climbing and VIX is falling, support zones become more reliable. Use this interplay between options sentiment and price action to confirm your trading bias.
We have the demand for SPX puts going up. That puts extra pressure on the S and P. Because as the demand for SPX puts increases, the value of the VIX also goes up. How can we use that to our advantage when this occurs? Usually what will happen is the S and P will be in a downtrend when the VIX is in an uptrend. And if that is the case, we have an edge when it comes to adding a layer of technical analysis onto the S&P 500 futures. We're looking for areas of potential resistance to play off of if and when the S and P has a relief bounce while the VIX is showing relative strength. And what this implies is that that resistance on the S and P has a higher likelihood of rejecting. On the flip side, when you have a strong market in the S and P, when trend is going up making a series of higher highs and higher lows, what tends to happen is the VIX price will go down making lower lows lower highs. In this case, you want to mark out areas of potential support. Anything that could potentially act as support has a higher likelihood of working when you have weak price action out of the vix.
