It’s been a while since we took a big picture look at VIX. Since it reached levels not seen since the GFC yesterday, this seemed like as good a time as any.

VIX is an interesting instrument. Once a reliable measure of volatility in the market, it was used by many to hedge risk.  As equity corrections became an endangered species, however, fewer investors bothered.

Eventually, VIX became a source of income for those willing to take a chance on selling vol. It might have seemed risky at times, but every one of the six times VIX exceeded 46 since 2010 was followed by a collapse to below 15.  Actually, make that 5 out of six times.On Feb 28, VIX shot up to 49.48, but it only dropped as low as 24.93 before bouncing up to yesterday’s high of 62.12. The price to which it rallied was significant.

Eagle-eyed members will note it’s been one of the higher targets on our charts for years – but, one we seldom mention as VIX is always smacked down upon reaching a lesser Fib level and a price between 46 and 54.  From the post Market Timing, a Bad Thing? last October.

The 25.50ish target represents the intersection of the .382 Fib, two red TLs and the midline of the white channel seen below. If 25.50 should ever be broken, things could get very interesting very quickly.

The 62.12 high was very close to the .618 retracement (58.6) of the drop from 89.53 in 2008 to 8.56 in 2017.

Now, it was no surprise that VIX stopped rising once ES had dropped to our 2728 target. But, the breakout begs the question: What do the charts say about the even higher targets?

continued for members…Today’s daily chart shows the intersection between important Fib levels and former highs – a rising channel if you will.Yesterday’s high was the first significant high not to align with these parallel channel lines.

If we look to the next higher channel line which connects the Jan 2016 and Feb 2018 highs, we see an intersection between it and the white .786 (72.2) right about now and an intersection with the white .886 (80.3) in May or June.

You might notice another gently falling white line plowing through that 80.30 level. This is actually the top of the huge falling white channel.  But, it’s not the biggest channel on the chart.

A larger channel, which incorporates the 1987 highs at 172.79, can be seen below in purple. Furthermore, if we adjust the bottom of the yellow Fib grid to incorporate the 8.56 lows reached in 2017, we can see some other interesting intersections. Note the yellow .382 at 71.3 is right next to the white .786 at 72.2 mentioned above. The white 1.272 at 111.55 is right next to the yellow .618 at 110.05. Both of these points are on the same rising red channel line. The very top of the falling purple channel is around 124.67, the yellow .707 Fib.

The chart isn’t completely bearish, though. The 2011 and 2015 highs are on a trend line that also intersects yesterday’s high. Given the propensity of central bankers to toy with VIX (and anything else which will prop up stocks – see: It’s Their Nature from Aug 2017) we have to consider the possibility mentioned in our daily post that ES 2728 is as good as the bears might get in this cycle.

All it usually takes is a drop through apparent TL support to ignite the algos and their followers-on to buy up everything in sight.

GLTA.