The change in the Vix was too high for a two day period given the macro economic back drop.
We have a situation where:
1. The most credible economic threat, Saudi Arabia, is trying to get ahead of any protest.
2. The oil concern is not really a concern, and priced in.
The VIX increase is predicated on the severity toward a systemic risk. IMO, that risk is not there right now. As such, a severe spike in the VIX is what typically indicates a market dip buying opportunity.
Market activity is always predicated on 'what ifs'. But these 'what ifs' have to be reasonably assessed.
What if Gaddafi steps down? Awesome. Today was the buying day.
What if Gaddafi stays hard-line and keeps killing his own people? Causes continued, but known uncertainty. Maybe enough uncertainty for the market to simply drift. Personally, I think the market has some really good value here, but with a drawn-out uncertainty it can drift sideways for a while or drift down.
If the market decides to drift down, instead of sideways, there is very strong support at the 62SMA. (However, almost everyone on CNBC is projecting this decline, and if everyone thinks some thing will happen, it usually doesn't.)
Something to keep in mind, if Gaddafi maintains his hard-line approach and continues on his killing spree, there will be a multi-lateral coalition to force Gaddafi out. President Obama's speech tonight, with the unison global voice of rejection of Gaddafi and his actions, was a message to stop the killings and get out asap. (Personally, I do not think America should take a lead role here. We should provide all the support and resources we can, but let the Arab League take the lead in removing him.)