The VIX is an ephemeral beast beloved by talking-heads and options-market-makers alike (and now FX strategists). In a rather alarming note from CitiFX today, they are concerned over the chance of an explosive breakout as one of their favorite technical setups comes to pass - a double bottom within a triangle. If these levels break then the team expects a test of S&P 1000-1015.

In a note titled "Oh Dear...", CitiFX points out:

The set up on the VIX is now looking increasingly like a double bottom within a triangle. This often results in an explosive breakout.

The levels detailed below need to be watched carefully as if they go then there is a danger we get to out 1,000-1,015 target on the S&P a lot faster than we thought.

The pattern above is one of our favourites when completed (A double bottom within a triangle.)

So far we have not managed a daily close above the neckline which stands at 43.18%.

A close above here would complete the double bottom and suggest an impulsive move higher to at least 56%.

That is a problem. Not only does that suggest another sharp selloff in the S&P 500 but it creates an even bigger breakout.

It has not been our base case scenario that the 48.00-48.2% level will be broken on a weekly close basis on this chart. If, however that does happen then there is a real danger that our 1,000 target on the S&P gets hit much quicker than we think.

The pattern on the daily chart above suggests that if we close over 43.18% we will go over 56% which by definition means that a close over 43.18% suggests that the 48.00-48.20% area will give way.

A weekly close above here would almost certainly suggest a move to our 1,000-1,015 target on the S&P 500 extremely rapidly. Such a development would also strongly question our present view in today’s’ weekly highlights that further consolidation was likely in the short-term before the next move lower in “risk”.

The target on such a break for the VIX would be at least 80%+...we are now officially worried.