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Friday, March 29, 2024

Hey, Apparently the VIX Went To the 20’s…….

Courtesy of Adam Warner at Daily Options Report

Hey, Apparently the VIX Went To the 20’s…….

 

OK, I promise by the close today I will stop running VIX charts and start running VIX bikini’s again. [that’s okay, Adam]  Just been a preponderance of well-written analysis of all thing VIX related as we hit 30.

Like this from Price Headley via The Tycoon Report.

In September 2008, we "broke out" on the VIX, taking volatility to a new higher range, in line with the market correction accelerating. As you can see in its weekly chart below, the previous top range in the VIX on spikes was around 30 on a weekly closing basis, now that is the bottom of the new range.

Actually, yesterday (Wednesday) the VIX broke all the way to 26.50 in intraday trading, only to reverse up and close at 29.03. This is telling me the VIX has gone as low as it can for now and, in turn, the market likely has a lot more risk than reward at current levels with the S&P 500 closing at 903.47 today.

You can see that, in addition to the importance of the 30 level, the 20-week Bollinger Bands show a relative low point also being reached when the VIX tags this lower band. (That’s the two-standard deviation band for the techies, which should usually encompass 95% of the VIX’s price action.)

So, a lower band test says we’ve gone about as low as we can go here in the VIX, with a pullback expected to take the VIX back up to 40 (at least) before we see the next spike in fear that could be considered a more meaningful buying opportunity.

Bottom Line: Putting all of this together, investors have to be concerned with the preponderance of technical evidence that the VIX could very likely make another bullish run, which would be bearish for stocks as fear starts to rise again off these relatively low levels. Supporting a potential VIX up-leg includes the long-term importance of the 30 level on the weekly closes and the test of the lower Bollinger Band on the 20-week moving average, which points to a relative extreme lack of fear in the market currently.

Click thru to see the chart he refers to.[51yRY7k107L._SS500_.jpg]

Now despite the fact that I run VIX charts all the time, I’m not that big on reading oodles into VIX charts. It’s just tough to relate volatility from one time frame to another, 30 VIX today means something very different than 30 VIX did 8 month’s or a year ago.

That being said, I do agree with his thesis. VIX is probably done imploding for now. I kind of think we see another dribble down in the summer, but perhaps that comes off 40 and not 30.

****

Note:  Adam has a book coming out in August.  Click here to pre-order it on Amazon: click thru here.
 

 

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