Tom McClellan had a very interesting entry on one of the MTA members-only blogs recently. He showed how the direction of theVIX followed the interest rate on 3-month Treasury bills, on a 2 year lag. Short-term interest rates plummeted in late 2008 into the beginning of 2009. So now, two years later, we might expect to see the VIX drop to very low levels. With the VIX being somewhat negatively correlated with the stock market, and considered a measure of “fear”, this would suggest good times for the stock market in the coming months.
This is a really excellent example of how technical analysis can go beyond simple chart reading to make connections between markets.