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VIX and S&P 500 at key levels, is breakthrough imminent?

|Includes: DIA, IWM, QQQ, SPDR S&P 500 Trust ETF (SPY), SPY, VXX, VXZ

Well here we are again ... the CBOE Volatility Index (VIX) has dropped down to the key 17.5 level, meanwhile the S&P 500 Index (SPX) has rallied again towards the 1,150 area.

Where have we seen this scenario before?  Well, it wasn't very long ago -- in January 2010, we tested these areas (see the following chart).  Last time around, we spent several days waffling around before a fairly big market reversal occurred.  This pushed the VIX from 17.5 all the way to the upper 20s, and the SPX dropped from 1,150 to around 1,050.

So, will history repeat itself this time with a market correction ... or are we going to breakthrough with continued upside in the SPX and decline in the VIX?  I would lean to the latter choice - why do I say this?  Well, first off the second test of key levels is often the point of breakthrough ... the market has shown resilience to push back up to here.  Secondly, we've again cleared a key Fibonacci level that I've discussed before around 1,121.  Additionally, the Daily Percent R on the SPX was over 99 on Friday, which is an extremely strong reading.  Also, there certainly is skepticism in the air ... yet we had one of the better economic reports in some time last week.

While I rely on various systemized signals for our Index Options Timer trades on (NYSEARCA:SPY) (QQQQ) and (NYSEARCA:IWM), which can go in either direction at any time, I would anticipate at this point that we will test 15 on the VIX before we again approach 30.

Moby Waller,

Disclosure: No positions.