After Fed Decision, VIX Futures See Important Signal: Sell or Rebound？

After the Fed announced a 75bps rate hike at 2pm as expected, and the US stock $S&P 500 (.SPX)$ turned from a slight up to a downturn, the trading volume increased, $(SPX)$ fell below 3800 points and closed at 3789 points.

The sell signal of distribution appeared, the $Cboe Volatility Index(VIX)$ surged more than11%.

'Fear gauge' futures close to signaling U.S. stock selling……

At the same time, the October Volatility Index futures $Volatility Index - Oct 2022(VIX2210)$ which linked to "fear gauge" VIX rose 0.28 points from November VIX futures $Volatility Index - Nov 2022(VIX2211)$ , the largest difference since mid-June, a signal that has historically marked the market facing huge selling pressure. , but sometimes before the stock market rebounds.

Note: VIX futures, which reflect volatility expectations in the coming months, generally remain in an uptrend, and near-term futures prices are also generally relatively lower than futures prices in the coming months.

Once an inversion happened, where near-term contracts are more expensive than forward contracts, indicates heightened investor fears about near-term events, raising the cost of hedging.

What happened after a inversion in history？

Since 2020, such signals have appeared prominently 5 times, with 2 subsequent market rebounds, the most recent of which was in mid-June. A sharp sell-off at the time pushed the $S&P 500(.SPX)$ to a bear market low. The index quickly bounced back 17%, though most of those gains were pared back amid fears the Fed would take a more hawkish-than-expected stance.

Susquehanna International Group co-head of derivatives strategy, Chris Murphy said an inversion in VIX futures often indicates a build-up of risk in the current market, "which is why we often see it as an indicator of capitulation."

Murphy said that while this inversion may signal increased selling pressure, it does not necessarily mean that the recent market rout will end immediately.

Technically, Strong technical friends believe that the kinetic energy history of MACD shows that there is a need for a rebound in the near future.

So does this signal indicate that the crash will continue, or may it indicate that the short-term oversold pressure will intensify and will usher in a rebound?

Please vote.

The market is trying to find a direction recently, no doubt huge voliatile woule come. For your asset safe, please hold on for a while after clear.