Zeev's Turnips Patch-No Politics (ZEEV)

[Ace Hanlon]

Russell Russell Says......................

As a market rises as it has been doing, the market is moving ever-closer to an ultimate top that lies somewhere ahead. On that reasoning, as a market rises, investors "should" be increasingly interested in protecting themselves, meaning buying puts. But the opposite usually holds true. What usually happens is that as the market climbs higher, instead of becoming more cautious investors tend to become increasingly bullish and confident.

When you divide the S&P by the VIX, you get a measure of confidence in relation to the market. A rising stock market accompanied by a rising S&P/VIX ratio means that investors are becoming increasingly confident in that they need less and less protection in terms of puts. Yesterday, the S&P/VIX ratio rose to 88.91, one of its highest levels in history. In fact, this level has only been higher for a few days during August of 2000.