I’d view taking a position in the VIX from a probability perspective & I’m referring to the probability of the stock market taking another major leg down towards my next long-term swing/trend targets I’ve highlighted on the daily & weekly time frames starting back in late June.

First, I feel that the rally, going off the assumption that it is/was simply a counter-trend rally within a larger downtrend, ideally needs to end about where it did today, at or below that 486.80ish resistance level on my daily chart. As I’ve stated, much above that level will likely trigger escape velocity where the QQQ & SPY will punch through to take out their previous highs.

Second, assuming today marked the end of the counter-trend bounce off the Aug 5th low, then if & as each half-decent or better support level below where the buyers “should be” stepping in to buy gets clearly taken out, that increases the odds, incrementally but increasingly (as each of the next supports are taken out) that the market is going to continue down to my deeper swing/trend targets.

However, and a big however, the odds only increase by relatively small amounts until & unless the Aug 5th lows & 200-day MA’s on SPY & QQQ (as well as the majority of Mag 7 stocks) are taken out, at which point the odds shoot up significantly.

Yes, when & if that last step happens, the $VIX will most likely be much higher than today and probably won’t provide a very objective entry. So basically, it boils down to your confidence on whether or not you think the stock market put in THE top in early/mid July or not. If so, then the $VIX is about as cheap as you’ll be able to buy it for quite some time.

Isn’t the VIX typically a canary in the coal mine for bottoms and tops? If it is acting up in a sideways market, doesn’t serve as a harbinger of a possible future decline. Of course, taking into consideration other indicators as this is just one of several. I guess what I am asking is how perky does have to get before taking a position in it?

I have noticed the $VIX edging up in recent sessions even while the stock market was grinding slightly higher but to get a nice rally in the $VIX, including the upper targets I have for VIXY, the stock market will need to start clearly heading lower again & if/when the recent lows are taken out (with the 200-day MA’s on SPY & QQQ), the $VIX should be in explosive mode once again.

If there are more buyers than sellers on the sidelines right now & the market is headed to new highs, the $VIX will likely remain slogging around towards the low-end of it’s range but as of now, it is still confortably above the huge divergent low it put in at the July lows before it exploded higher.