In January’s major update on VIX, we noted it as approaching support at 15 and was following a fairly bullish path higher (bearish for stocks.) Almost as an afterthought, we included the much lower red target which represented the “what if we’re wrong?” scenario.
This chart, of course, was prior to the discovery of our new analog in March [see: A New Analog] which completely changed our outlook. As fate (more accurately, central bankers and their accomplices) would have it, VIX blew through the support at 15 and nailed the red target instead.
It has since tagged our even lower target set in May (though a little late) and has fleshed out the lower half of the falling white channel we first suggested in March.
Yesterday, it tagged the midline of this falling channel. But, today, it fell back and tagged the .236 line. In a normal, unrigged market, this would mean a bounce higher (to the .786 line — white dot) and a continuation of stocks’ slump — especially in the wake of the recent Big Butterfly Pattern completion and today’s BoJ comments on the yen [see: Did Kuroda Just Kill the Bull Market?]
But, seeing as how this one is anything but unrigged [great example just today], we take this kind of move with a cautious grain of salt.