The "strong hands" buyers calm the market and absorb the selling pressure and drive down in options prices, which sets a floor for future setbacks in the market.
The graphs above show you what the 4-VIX-Spikes of 5+ points look like this year and how to analyze them.
Once you "see" the pattern, I think it is rather intuitive.
Refer to my other publications on this unique effect and join me in our intra-day chat room called "Key Hidden Levels" right here at TradingView.
I have this as a "long" idea for the main purpose that the mid-point of the last accumulation was tested and held AND the September setback held the top of the May and June accumulations, which was to be expected.
The logical exit on any longs purchased down around the 18,130 level (midpoint of VIX spike & retracement) would be around the $18,500-$18,600.
Tim 12:22AM September 29, 2016 18,339 last $DOWI
Another VIX spike of 5 points gives us another support zone. These are still of "small spike variety" and we are just lingering around. Normally, like a boxer when he gets knocked down, the market stands back up and gathers itself and resumes the advance. This latest VIX spike pushed prices to a slightly lower level, which spells some trouble. If the sentiment were optimistic here, I would be very bearish looking for major movement to the downside, but with sentiment the lowest in decades and prices up near the high and above support, then I am constructive on the market.