The Dow has fallen into negative territory once again after rallying over 200 points earlier this morning. Since its high of 11,800 at the beginning of the month, the Dow has fallen over 1,200 points with 800 of that coming this week.

I’ve been mentioning the VIX (VIX, 37.74, up 1.52) lately and for those of you new to the blog, the VIX is the CBOE Market Volatility Index that measures market sentiment. The market has had a lot of downward momentum and when the market goes down, the VIX goes up. The value of the VIX decreases when the market heads higher.

If the VIX is at 30 or more then it means the market is nervous which is currently where we are at. The VIX closed at 25.66 and the Dow stood at 11,421 last Friday. You can see the rise in the VIX as we headed lower on the Dow this week.

If the VIX is at 20 or lower then it means the market is confident. There are no real catalysts for the market to head higher until maybe when the election gets into full swing. It’s possible the VIX heads into the 40’s as we close out September and head into October. Company earnings will be coming out in a couple of weeks and you can almost bet we are going to see even more volatility.

Although the VIX is not a tell-all sign on where the market is headed, it can be a helpful tool. The market is not out of the woods and it will be interesting to see if we can hit the mid 40’s on the VIX. If this happens there will be plenty of opportunities to go long with call options on certain stocks and sectors.

Rick Rouse