Click on Chart to Enlarge

The VIX touched its lower bollinger band today indicating that this reaction rally could possible stall out soon.  Each time over most of the last year, when the VIX touched the lower band, the market soon topped out and corrected.  The red lines show the last times when the VIX touched the lower band.  Also the bands are not currently in a trending type configuration, so I don't presume that it will trend lower, though that could develop.

An interesting thing in the VIX today is the market made nice open to close gains and was up huge.  However the VIX was down relatively modest compared to normal correlations.  Also the VIX actually closed up from the open, which bucks the typical trend in the VIX which is inverse to the SPY/SPX.  So I don't know exactly what this means, but it is a little odd for a typical market rally.  I take it as a sign that the psychology is not in bull mode at this time at least.  It looks a bit more like a bear market rally.

Click on Chart to Enlarge

A couple things to note here on SPY.  First off the big gap down from last week has now been filled which could allow the market to top and continue lower in a downtrend.  However, the gap was closed in a major way, and the market did not find any resistance there, so it may not be a factor for capping this reaction rally.

On another note, when a triangle forms at the end of a correction as I have labeled above, there will often be a reaction rally back toward the apex of the triangle after the initial breakout.  We may be seeing that here.   Tomorrow is the apex of that triangle.

Obviously these huge gains seem extremely bullish, and it may well be that.  But most of these huge gaps up on news/etc that I can ever recall seeing are in bear market rallies.  In any case, as I have posted previously, it would be more typical for the time frame of a normal bear market rally for the market to push to a new rally high before topping.  So that wouldn't even really negate a possible bear market environment.

I don't have a great take on this right now as far as what to expect.  But there are a few things I have mentioned here and looked at that would suggest if this is a bear market rally, it should be done in the next day or two.