I see this as an important chart that I keep coming back to in my nightly research that is signaling that a correction is very close. Over the past 3 and a half years when the VIX gets near the 15 level it has a significant pullback. It doesn’t always happen right away, and can linger for about a month like it did in April ’10, but a pullback set off by the Flash Crash quickly ensued. The only time the correction wasn’t of any real concern was at the start of ’10, where the pullback was very shallow.
We’ve been flirting with the 15 level for the last 5 weeks, which is about the same amount of time around April that it was stuck around this key level. I think one additional parameter we can add to this signal is when the RSI goes above 50, that could be a signal that the move is real and that the markets are ready to fall hard.
I would also watch the 40 level as a place where the VIX could bottom, and consequently, the markets should top.
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