Of all the tools central bankers use to support stocks, VIX is perhaps the most useful. Frequently, a breakdown in VIX has been used to signal algos to push major indices above significant overhead resistance such as a major Fibonacci extension or channel top.
We last noted this phenomenon back in April when SPX was pushing up against its 3.618 Fib extension at 3956 [see: Irrational Exuberance and You.] Sure enough, VIX broke down through the falling purple trend line (#3 above) and SPX sliced through the resistance.
It’s significant because once again VIX faces an important test of support, the bottom of the channel from 2017. What it does here will determine whether or not the rally can continue.
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