Is VIX Suggesting Market Collapse Around the Corner?

It took the mar­ket sev­eral weeks to fool the last momos going long this mar­ket. We are see­ing the biggest daily drop this year in todays ses­sion. Over the past weeks peo­ple have been buy­ing equi­ties, sell­ing vol, and all agree­ing “volatil­ity is dead”.

Well, real­ity is back, vol is spik­ing, and the con­fi­dent investors is scratch­ing his head. Below is a chart of SPX and the VIX. Note what has hap­pened when mar­ket crosses these “mag­i­cal” lev­els. Last time VIX traded at these lev­els (for more than a day or two), SPX was at 1300. The other times VIX crossed these lev­els in a sim­i­lar fash­ion, mar­kets col­lapsed. What’s next?

Maybe not the big col­lapse, but this Crash of 1929 video is def­i­nitely worth review­ing, just in case....