Above is the daily chart of Volatility Index (.VIX). It has been giving good hints to us about how the indexes would move.
Breaking out in Early August to around 48, VIX is currently moving in a narrowing trading range, which started from 30-48 to 32-43. This is expected to keep on dropping unless the index breaks either side.
Using the extreme high in late 2008 and the low in 2011, we can get the fibonacci levels. Interestingly, the level of 32 represents 23.6% retracement level. This shows that this level would support the index.
On the other hand, I identified an Andrew Pitchfork on the chart shown in purple. VIX has just reached the lower line of the Pitchfork as well. This fork gives support to the index too.
Therefore, it is more likely that VIX is going up again, and stops at around 41-42 due to the red down-trend line resistant.
Once the index breaks out, it would go even higher than 50. As I have mentioned, this would mean something serious happening because 50 is a critical level.
So I think at this moment, when everything seems not too bad (not good as well), chance for break down would be higher. Index will consolidate if this is the case.
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