Thrift Savings Plan

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Awfully quiet over here…bad news for the markets? Here’s a version of my 30 May post at my Navigate the Stock Market Blog at…
http://navigatethestockmarket.blogspot.com/

VIX has only closed under 10, 13-times in its history. It is important to consider that this extreme level of complacency represents a risk. Except for this May, the last time VIX closed below 10 was January of 2007. 6-months later, in July of 2007 the S&P 500 peaked around 1550; it peaked again at about 1560 in Oct 2007. Following those highs, the Index lost more than half its value in the crash that followed.

Is a crash is coming in 6-months? Let’s examine those prior closes below 10 in more detail. From the crash in 2001 going forward until the crash of 2007, there were only four instances when the VIX closed below 10: twice in November 2006, once in December 2006 and once in January 2007. My take is that the 4-closes below 10 in November 2006 thru January of 2007 foretold of massive complacency that set the stage for the crash that followed. VIX doesn’t cause a crash, but it does suggest that a bad-news shock could start some serious selling.

We have now seen 4 closes below 10 in May 2017. From here, we should be very wary and pay close attention to the markets.