Further analysis on volatility (2011-10-14 VIX analysis)

Hang Seng Index spiked another 2.34% to 18,757. It looked like those resistance levels meant nothing to the index. So basically after surging back within the Pitchfork, the next resistant should be at around 19,500.

But S&P500 Index was moving as expected. Two days ago it closed at around 1,207 and yesterday it dropped a little bit to 1,203. We can see the resistant zone actually worked.

Let's take a look at the volatility.
















Above is the daily chart of Volatility Index (.VIX). As usual, we can see the big red channel with a wide trading range from around 30-46.5 now.

The index touched the lower boundary of the channel two days ago, and rebounded yesterday. It appeared that the channel is still a strong one which restricts the movements of the index.

However, I found an interesting fact. By drawing a fibonacci retracement using the low in April and high in August, we can see that 50% retracement is a pretty strong support level.

Firstly, it supported the index from plummeting even lower in mid-August, at the level of around 31.

Since then, the index more or less closed above this level, even after they had an intra-day low below this level. The lowest close was 30.98 on 16-Sept.

But yesterday, the index closed at 30.7. This means that the strength of the support is getting weaker. It might be time for the index to move on to the next retracement level.

Would it be the case I mentioned last week, that the index is going to plunge and drop to pretty low levels and move sideways?

If so, then S&P500 index would probably not slump, and is more likely to rise slowly or moving sideways.