Take a rest now? (2011-08-09 VIX analysis)

Another crazy plunge in US markets yesterday night (over -5%), and HK market would probably follow again today dropping over 1,000 points. I expect the index reaching 19,000 support level which I mentioned yesterday.



Daily chart of Volatility Index (VIX):





Finally I had to zoom in the chart to over 3 years. With the sudden movements these few trading days, the volatility index jumped and reached the 2-year high at 48.



I believe its time for the stock markets to take some rest. Nevertheless, we can see that the only period when VIX surged over 50 was during Financial Crisis in 2008.



Although there are many bad news coming and coming now, there is no single trigger that could result in it; unless one of the few countries goes default.



Therefore, consolidation/slight rebound should happen for S&P500 tonight, perhaps after the big fall in HSI today.



And then when its time for another crisis, the VIX would be jumping high again.