The dramatic sell off in the VIX these past few weeks suggests that a lot of complacency and comfort is returning to the market very quickly (consistent with Larry Kudlow - perma bull behavior). IMO this VIX selloff and subsequent stock rally is because all the big institutions have closed up shop for 2008.
We have key support and a rising 200 day MA that will likely act as support for "fear and uncertainty". I know it seems stupid to apply TA to the VIX, which is tracks emotion/sentiment, but it's important to juxtapose how much people's emotions/sentiments are changing relative to their feelings a few weeks/months back.
Macro-wise, things have not gotten better in this market, yet the graph says stocks are comfortable with that news. I willing to believe and "bet" my money that this market is wrong and is clinging to false hopes (like "Barack the builder" or "2nd half 09 recovery") and will be gravely disappointed. Remember this market is irrational, short-sided and will be proven wrong (yet again) by a massive VIX rally in early 2009 that will retest the 80 level at least.
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