Is this Complacency?

The VIX is 10% below it’s SMA. The last time it sat this low in absolute terms was was June 17th.

But remember, the VIX has consistently understated the actual volatility we have all felt in 2008.

How about the SKF, the REAL fear index this summer?

Well, it’s down almost 100 points off the intraday high of 211.75 on July 15th. 30 day normalized volatility peaked that day at 131, it’s now about 80. It also sits right at it’s 200 Day MA, although I would caution that using MA’s to analyze a derivative of an ETF of an index could prove a bit hazardous to one’s health.

There’s no magical number here, the same way there’s no magical number in the VIX. But if past is prologue, the volatility drop off the highs is similar in magnitude to what happened the last time financials bottomed, in March. That took two month’s to play out though, and we’re not even 1 month into this one. The drop in SKF itself is more severe this go around, although the launch to the top was more abrupt as well.

So did we get too complacent too quickly? Put this all into the backdrop that this is August, and the default setting on options is "Sell" and it suggests volatility can continue to struggle a bit before you can really say complacency went too far.

P.S.  I asked Adam if he thought we would get more complacent with the SKF going down from here, or if it’s more likely that the financials will pull back, with the SKF going up?

Adam:  "Not really "predicting" the SKF per se, just saying really that it’s summer, and it’s probably more likely we have a month of non-volaility here. Not sure that’s complacency though, as much it’s just the reality of late summer trading."

– Ilene