Fear Factor

There are several contrarian indicators that are studied to help professional traders determine if the market is reaching "tops" or "bottoms". These indicators aren't foolproof or timely, but are watched nonetheless. One of these indicators is the Volatility Index (aka "The Vix"), which is a measurement of fear in the marketplace. For eternity the VIX traded within a range from (approx) 10 to 45. So a couple of weeks ago, when I was talking to my sister I mentioned to her that The Vix was approaching the top part of it's range and therefore would be expected to rollover....meaning Fear would come down and the market should go bullish (even if only for a period of time).

How wrong I was...
So then I analyzed the chart further. Technical analysis teaches us that patterns, when broken, tend to have certain results. There are all sorts of patterns on stock charts: ascending triangles, symmetrical triangles, head and shoulders, double-bottoms, and so on. When there is a range, such as on the Vix, then the target price would be equal to the height of the range. But, I thought "No way is the Vix going to 80!". Here's the calculation: 45-10 = 35 (the height of the range); 35+45 (the breakout point) = 80.
And I repeat myself...how wrong I was...the Vix not only closed at $80.06 the other day, but just about touched $90.

So, now what? Who knows...I'm no longer trying to guess what the market is going to do! But, again, our education has taught us that what was once prior resistance ($45 on the Vix) may now act as support. All we know for sure is that this is a different market we're in. There are a lot of unknowns in our economy and until after the election (when one of the unknowns is removed) I'm not sure if the market will do too much.