Vexed by the VIX?

If short-term trading strategies are influenced by the subjective, if not emotional, interpretation of risk, who then can deny the benefits of the VIX? The VIX or volatility or 'fear & greed' index, whichever way you like it, although reactive, does give investors a transparent market prognosis.

One of the interesting things about the VIX which you might not know is the accuracy of its 'prediction'. The VIX peaked at 49 in ALL but one major market sell-off. If you take the 6 equity sell-offs of the last 20 years ie: the October 1997 Asian crisis; the Oct 1998 LTCM hedge-fund crisis; the September 11 'terrorist -attack'; the July 2002 bear-market; the 'financial crisis' of 2008 and the first European solvency failure in May 2010 all but the 'financial crisis' in 2008 bottomed-out at a VIX of 49. The VIX peaked at 49 early last week and has subsequently turned down and consolidated in the lower 30s. 

So, if history is to be believed, when the VIX moves close to or at 49 and turns back down, markets generally consolidate and build a base. You could, quite conceivably, make a case for a consolidation in global equity markets. Conversely, if the VIX breaks 50 in the next few days or weeks then expect trouble, very big trouble...