This chart has been inspired by Tony Dwyer idea that there should be a retest of the 40 levels on VIX by the end of September/October.
In 2011, we were more or less in the same situation, we saw VIX climbing above 40 a first time and then a second time later.
This hypothesis suggest market is still not ready to be 100% bullish before testing again the lows of August. So I would wait to see a retest before taking new long positions on Equity market.
Are you suggesting that a test of 40 VIX means there is always another test of 40?
magnans
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Hi Tim,
This is only an observation of similar periods (1998 and 2011).
As I do not see a "V" correction on SPX, then it should be "W" correction and we would retest the lows of August by the end of the month, or mid October.
As the VIX is now at 25.90, it would not be surprising to see the VIX again at 40 if the market fall again. We are still in a high volatility and stressful times.
magnans
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So, the answer is NO, you CANNOT say if there is a test at 40 means there is ALWAYS another test of 40.
BUT it is going to be VERY interesting to see if we are repeating the same patterns as 1998 and 2011.
To be continued...! :)