A rare sell signal is triggered

The market is in an euphoric mood at the moment and all the sudden it seems everyone is more bullish than bearish, a change of the mood from extremely depressed to euphoric within just a week or two. However, we have just see a rare sell signal triggered. See below an analysis forwarded by my friend. 

I'm certainly not chasing this market right now. Using special option setups, I'm betting on the downside with a small risk for a potential 3-5 times return. Granted, in this headlines-driven market, it is not easy to trade when the market direction can change within hours or even minutes. But still betting against the extremes of sentiment is generally a winning strategy. So I'm risking a little for a big reward!😜🤗

*****************************************************

VIX sell signals are rare. And, they're not all that bad… at first.

The two previous sell signals led to immediate (but shallow) declines. In each case, the S&P 500 lost about 2% over the next week or so. That's about 100 points on the S&P 500 in today's environment.

Following those brief declines in late November 2019 and August of 2018, the S&P 500 bounced back and rallied to even higher levels. So, if we follow that road map, traders ought to be looking to buy if the S&P 500 dips back down into the 4350-4400 range.

But (and this is a big but) …

Both of those previous VIX sell signals occurred about three months before the stock market was hit with a far more significant decline. Traders might remember December 2018 – when the S&P 500 dropped 16%… and the start of the COVID pandemic, which inspired a 29% collapse in the stock market in March 2020.

Granted… we only have these two examples. And, it's probably unwise to draw conclusions from such a small sample size.