The VIX matched its all-time-low yesterday of 9.88 and went slightly below it. At the end of the day, it closed slightly above it at 9.90.

This level is hugely important for the markets. From a technical standpoint, the VIX is now back inside its descending channel and if it moves past this support level, it would mean that the next support level is at a VIX of 5.

This would be absolutely absurd with housing in a slump, the auto makers crying to Bush for concessions, and an economy that is trying to avoid a recession.

Why has it even gone back down to retest the all time low?

Because of the Federal Reserve. After hiding M3 Liquidity levels last March, they have accelerated Liquidity at approximately 10% in an effort to stimulate the economy away from a recession. They are now into an over stimulation modality that will be a big problem when the markets try to go back to a "normal state of balance".

Keep an eye on the VIX through next week as this is a very important level.

It would be better for the markets to have the VIX move up with a market pull back than for it to go drop extremely low and create a market blow off condition. Market blow offs have very ugly endings.

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