The VIX daily chart on the left hand has reached a level which usually would mark the low in a market and a 50 level does basically earmark capitulation. In this case though, it's a bit different - more like the Sept. 2002 version where the actual low of the market came in October. This time, I think the probability is very high for a similar case. The magnitude of wave 1 up from mid May to mid July was 15 points and wave 2 down had a length of 6 weeks and 12 points (75%). Wave 3 had so far the double length of wave 1 but only in 1 month time frame which will not be sufficient, I am afraid. The whole process will take another 4 weeks and we might even have to go briefly above 50 before coming down below 30 levels. Short-term, as we head for the Congressional vote on Friday, we will trade up to 45 before dropping to 35 with a positive vote (more likely) in that case after a brief rally (for probably a week).
We are entering earnings season and that might through another shadow on the situation, plus the fact that Obama is in the lead close to elections and that does not bring a positive spin to the market. A No-vote throws us directly into the second part of the capitulation, thereby, I am sure they take another swing (less likely that we will need that) for the bailout package. Very close to the elections or right after, we might have the bottom in markets respectively the high for the VIX.
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