I was going through my chart list and found a chart I put together in February and that I featured in this post: The VIX and Market Tops and Bottoms. The conclusion from that post was:
But based on the last two major tops (2000 and 2007), the VIX had very obvious divergence with the SPX. That isn't exactly what we are seeing now. The VIX is making essentially a double bottom (or as shown below, the inverse VIX is making a double top) when measured on the timeframe of a year. I would be very hard pressed to call this divergence 'obvious', especially compared to the last two major tops. This is another market measure that leads to the conclusion that I reached a few months ago: Whatever top we find here will not be a 'major' top. For more discussion on my long term thoughts, see here: Macro Thoughts and Observations. Is the Bear Market Dead? Is this the Start of a new Secular Bull Market?
Since that post in February, the peak in May also saw a lower low in the VIX, which means that there was no VIX divergence at the May peak. By itself, that is not conclusive to say a major top won't form, but when taken with other evidence, I think there is still a compelling case to be made that the May highs will be revisited (and likely broken to the upside) before this cyclical bull market is done.
So yes, that means that I think this current down wave is likely to be a correction in the cyclical bull. I have been maintaining for awhile that this will be a complicated 3-phase cyclical bull market (upleg, consolidation/sideways, upleg). Much like the 1970-1973 cyclical bull (Primary Wave). But since this wave is one degree higher (Cycle Wave), it will take longer and have a bigger sideways section in the middle. And after things are said and done I think this zone between a 1350 and 1050(ish) will end up being a relatively sideways wave in the big picture sense.