• There are a number of technical indicators which suggest that a sharp move higher in this volatility chart could be seen in the coming weeks.
1. The fall in volatility from the October 2008 peak was an almost perfect 76.4% pullback of that 2008 surge
2. At the low it posted a “doji” week. This is when within the trending move a new low was set on the week with a reasonably wide range of volatility but it finished the week pretty much unchanged i.e. indecision creeping in. A similar development took place at the low in July 2008
3. Triple positive momentum divergence has been posted on the weekly chart. This is one of the favoured indicators and develops when the market sets a low followed by 2 further lower lows. At the same time the momentum sets a low followed by 2 higher lows i.e. divergence confirming that the move to new lows is losing steam.