Finding a channel and Fibonacci grid puts the entire messy disorder of a random number generator into perspective. Don’t ask for miracles. Imagine the possibilities while looking backward:
1. The RUT hastens its speedy decline past the channel support and 23.6% to reach the 38.2% line. This seems likely but not quickly. If this did happen quickly, the market’s correction will be steep.
2. More likely near term is that the RUT consolidates for a spell.
3. The RUT rebounds to test the 20 DMA as resistance/support. This could happen. As a contrary indicator to myself, we might say this is the most likely.
Some friends of mine made a lot of money last year exploiting the difference between the cash and futures prices of volatility. The 12/28/2012 chart above was dynamite. The chart below is our current one, and it is far more pedestrian. Of course, once things settle a little and the sequester business is handled, we might see the VIX back at 14 or less.