What I’d like to look at, specifically, is the technical similarity to the selloff of October and November of last year. The chart below shows the S&P 500 and, below it, the Volatility Index.
Typically, as stocks make new lows, the VIX moves in the opposite direction and makes new highs. However, last November when the S&P took out its October lows, the VIX did not make a concomitant new high. That divergence led to a significant rally.
Similarly, as stocks make new lows for 2009 today, the VIX is once again diverging in failing to make a new high.
This is a bullish development and it’s pretty obvious with this renewed selling pressure that the bullish path right now is “the one less traveled by.” In other words, it’s a contrarian’s playground.