I haven’t focused on the VIX as a timing tool for a couple of years because everyone started using it. I think when everyone looks and knows about an indicator, it loses its usefulness.
However, it might be useful to put it back on the screen. The VIX recently broke out of a long term downward wedge. Technically, the only thing that this means is that volatility is expected to pick up. Intuitively, I think it could mean that the market could be facing more downside.
A VIX at 19 – 20 has typically marked good buying bottoms and we haven’t seen one of those for a while. I wouldn’t be surprised if this market doesn’t bottom until we get the VIX to that level again.
