In keeping with our “this-thing-could-break-either-way” theme, VIX is prepared to either break out or break down. Note the well-formed falling channel containing the decline since the 15th.
From all appearances, I’d say it makes a great argument for a continued slide in VIX (higher stock prices). But, the bigger picture argues quite the opposite. VIX’s slide has taken it to the .25 channel line of the massive falling white channel that dates back to 2007.
Not that this market is “normal;” in, fact, I’d argue that as long as central bankers and algos continue to have their way, it’s not really a market at all. But, prices within a channel normally ping pong between the .25, .50 and .75 channel lines. The spike that peaked on Oct 15 reached the midline of the falling white channel and has now backtested the .25 line. Under convention, the next stop would move up through the midline to the white .75 line at 40ish, followed by a possible backtest of the midline and ultimately the top of the white channel at 60ish.
I’ve marked the .75 line with yellow. Note that it lines up with the white .382/yellow .786 Fib lines. And, the final destination (in red) lines up with the yellow 1.272/white .618 (yes, it’s only a 61.8% rebound of the drop from the all-time high of 89.53 in Oct ’08.)
Of course, this is the worst kind of rank speculation (is there a best kind?) But, it’s something to think about if TPTB can’t engineer a few more rallies like we’ve seen the past week.