Volatility Index (^VIX, 74.26, up 6.62) on a monthly basis now 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. At the end of September I had mentioned how the VIX had spent 10 trading sessions in the 30’s and looked poised to jump into the 40’s, which at the time was suggesting Wall Street was anticipating a dramatic price decline in the market. As we headed into October the VIX kept rising and we saw the market fall to a fresh low a few weeks later as the Dow hit 7,773. The VIX hit a high of 90 once we bottomed and fell to a low of 44 right before the President election which is still high. For you history buffs, if the VIX is at 30 or more then it means the market is nervous. If the VIX is under 20, the market is confident. It’s not clear what the “new” standards should be for the VIX because the volatility has also been historic. However, this week is getting worse by the trading day and we could see the VIX test its high. If that’s the case, be prepared for another leg down. If the VIX reaches 100 the Dow could easily fall below 7,500 which could trigger a massive sell-off Rick Rouse Rick@OptionsMentoring.com]]>
