Approaching Record Lows

Today´s session was truly unique in terms of the intraday pattern of the VIX. On our previous post we pointed out to what appears to be visible signs of market fatigue. Today, after the Dow was accumulating triple digit losses, it formed a beautiful U-shaped intraday bullish pattern which was further reinforced by a very strong resistance level at 31.80 on the VIX or 30.60 on the VXO which proved impossible to penetrate, had it done so, the next resistance level would have been at the 34.50 level for the VIX which is the next key resistance level. To read more about the importance of this level click here.

The remarkable thing about the VIX today is the intraday spike low at 26.41 right after the open at 30.84. This low was the same as the one on 5/20/09 which lead to a significan market drop and it drove the VIX to the 34.50 level three days later on 26/05/09. If we look at the daily chart below taken from Telechart Gold software, we can compare todays spike low to the one we have circled in yellow. The latter one coincided with the point when the sideways pattern ended around late Jan 09 which lead to the last leg down of the markets to March 09 when it finally found a floor. If today´s spike low proves to be the real deal, the sideways action will be finally over.