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Thursday, January 18, 2018 5:55:58 PM
VIX “Spiking” to 12-13 is not a reason to dump stocks
By Almanac Trader | January 18, 2018
Recent market gains have been accompanied by a “spike” in the CBOE Volatility Index (VIX). In percentage terms, the increase in VIX would appear to be quite significant, but in absolute terms and within the context of history (even recent six month history), there likely is little cause for concern. For starters, VIX was near all-time lows on January 4 with an intra-day low of 8.92. VIX’s all-time intra-day low was 8.56 on November 24, 2017. So based upon VIX the market was rather dull. This dull assessment can be confirmed by the narrow daily trading range observed on numerous occasions throughout 2017. Now that the market has awoken and daily moves have approached 1%, VIX has picked up.
Then there is the VIX’s nickname, the “fear” index. It gets its nickname from the fact that it tends to rise when the market is in decline. However, the VIX is actually quoted in percentage terms and represents the expected range of the S&P 500 over the next year at a 68% confidence level. VIX is directionless. A reading of 12 today means a range of plus/minus 12%. Because panic selling is far more common than panic buying, elevated levels of VIX are far more common during declines hence the nickname “fear” index. Let’s not overlook the possibility that 12% over the next 12 months is also in play now.
Lastly, VIX has a historical tendency to move higher in January. In the following chart weekly open, high, low, close values of VIX are plotted in the upper portion and VIX’s seasonal trend (using data since 1990) is plotted in the lower section. Beginning in January, VIX does tend to climb higher and peak around mid-February. From there VIX then resumes course lower until mid-July and the start of the frequently low-volume summer doldrums. At which time VIX begins moves steadily higher into mid-October around the same time that the stock market posts a seasonally low and the typical yearend stock rally begins pushing VIX lower once again.
Absent confirmation from other technical and fundamental data sources, the recent rise in VIX from near historic lows to the 12-13 range is not as significant as some headlines may suggest. Economic data is firm and trending in a positive direction and daily Advance/Decline lines are also bullish further lending support to continued stock market gains in the near-term.
http://jeffhirsch.tumblr.com/post/169863427653/vix-spiking-to-12-13-is-not-a-reason-to-dump
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Click on "In reply to", for Authors past commentaries
By Almanac Trader | January 18, 2018
Recent market gains have been accompanied by a “spike” in the CBOE Volatility Index (VIX). In percentage terms, the increase in VIX would appear to be quite significant, but in absolute terms and within the context of history (even recent six month history), there likely is little cause for concern. For starters, VIX was near all-time lows on January 4 with an intra-day low of 8.92. VIX’s all-time intra-day low was 8.56 on November 24, 2017. So based upon VIX the market was rather dull. This dull assessment can be confirmed by the narrow daily trading range observed on numerous occasions throughout 2017. Now that the market has awoken and daily moves have approached 1%, VIX has picked up.
Then there is the VIX’s nickname, the “fear” index. It gets its nickname from the fact that it tends to rise when the market is in decline. However, the VIX is actually quoted in percentage terms and represents the expected range of the S&P 500 over the next year at a 68% confidence level. VIX is directionless. A reading of 12 today means a range of plus/minus 12%. Because panic selling is far more common than panic buying, elevated levels of VIX are far more common during declines hence the nickname “fear” index. Let’s not overlook the possibility that 12% over the next 12 months is also in play now.
Lastly, VIX has a historical tendency to move higher in January. In the following chart weekly open, high, low, close values of VIX are plotted in the upper portion and VIX’s seasonal trend (using data since 1990) is plotted in the lower section. Beginning in January, VIX does tend to climb higher and peak around mid-February. From there VIX then resumes course lower until mid-July and the start of the frequently low-volume summer doldrums. At which time VIX begins moves steadily higher into mid-October around the same time that the stock market posts a seasonally low and the typical yearend stock rally begins pushing VIX lower once again.
Absent confirmation from other technical and fundamental data sources, the recent rise in VIX from near historic lows to the 12-13 range is not as significant as some headlines may suggest. Economic data is firm and trending in a positive direction and daily Advance/Decline lines are also bullish further lending support to continued stock market gains in the near-term.
http://jeffhirsch.tumblr.com/post/169863427653/vix-spiking-to-12-13-is-not-a-reason-to-dump
• DiscoverGold
Click on "In reply to", for Authors past commentaries
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Your Due Dilegence is a must!
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