The VIX rose by more than 20% yesterday. When this has happened it has consistently led to short-term market rallies with the peak gain coming around 4 days later.
In looking back at the past instances of these VIX spikes over the last year, I have seen a tendency for the markets to gap up the next day, which occurred today. However, it was far from smooth sailing after the open. In several instances the markets fell hard during the day to actually undercut the prior day's low significantly, and then stage a very large rebound before the close to end up in positive territory.
SPY is appoaching yesterday's low as I type, so we are halfway into that pattern again. I would be more inclined to try to pick a bottom reversal today than on most days. I would follow the 15, 30, and 60 min charts today to look for a hammer reversal type of candlestick occurring on heavy volume after the markets break yesterday's lows.
Also, I have mentioned several times on this blog that filling and reversal at key gaps is a key part of my methodology for selecting good trade entry points at short-term extremes. The large gap up at 79.50ish from the day after the Nov 21 bottom is not yet filled. I would be surprised at this juncture if buying interest does not come in when that gap is filled.
I may suggest re-entry to the recently stopped out BGU trade if things shape up well today.
Pete
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