I think most of the readers of my blog understand that the VIX is a basic inverse indicator for the stock market. When the VIX is high, it is flashing a potential buy signal and when it is pointing down, it represents complacency and it would be time to sell.
The thing is with the VIX it is far more violent in both directions, but it fully displays the fear or the lack of fear at all times. I show using a big "ABC" wave count in Minor degree, but it can work just as well as a larger wave 3-4-5. The VIX peak in August matches the first bottom crash of the SP500 and has not been retraced yet.
The decline from this August peak has been nothing but overlapping waves which I can only count as a diagonal decline. My 4th wave rally seems to work as a triangle right now and since December the recent peak has finished a 3 wave count. This three wave could turn into an impulse, but at the $18 price level my gap will get filled. The VIX it will also get very close to entering the price territory of my wave one.
What I have as a "D"
wave crash is about as perfect of a zigzag you will ever see, and eventually that "D" wave zigzag and the entire potential 4th wave will all get retraced. I am also sure that the very top around the $53 price level will also get retraced. This is actually not rocket science as I am sure smart and experienced contrarians see the same thing.
First the potential "E" wave has to be fully retracted and even a new potential bottom or double bottom could also form. If this all plays out I would not rule out that the VIX could hit the $10 price level one more time, but first the VIX has to hit $14. One more little leg up on the VIX would kill this entire bearish scenario.