Where's the VIX?
While the S&P 500 has fallen 6%, and 7 out of 10 trading days this year have been 1% days, the VIX index (30-day expected volatility) has been relatively stagnant. When the index made lows in August and November, we saw the VIX spike above 30. The recent free-fall to new lows was met with a VIX move to just over 25. The VIX is also known as the investor fear gauge, so fear isn't currently as high as it was in late 2007. Bulls can interpret this as a positive (investors aren't really as scared as the market is implying) while bears can interpret this as a negative (still too much optimism out there). Please let us know how you interpret it in the comments section below.
Too much optimism. No real spike down, just the sand papering, dribbling down, slow deterioration of a medium term bear market. Everyone keeps talking about the Fed inter meeting cut, about a potential bounce, which means the bounce will be delayed until they give up. Even Intel's gap down doesn't seem to REALLY scare people, just another slight blip down. I hope we get something scary by Friday, so that we can bounce properly on the early Fed cut.
Posted by: Jack | January 16, 2008 at 08:59 AM
Yep, no fear here. Skip those sentiment polls, and pay more attention to VIX and Equity Put/Call ratios.
Sentiment poll said many are bearish, but the investors actions in VIX and P/C ratios show that they are still in wonder land, waiting for FED and Bush.
When VIX spike and P/C show investors to be very bearish, I will then cover my inverse funds.
Posted by: Sean | January 16, 2008 at 10:15 AM
MARKET IS NOT NEARLY AS OVERSOLD AS LAST TWO BREAKS. EXPECT A FINAL WASHOUT
Posted by: DOYLE LARKIN | January 16, 2008 at 12:08 PM
Optimism is based on not recognizing the difference between numbers in millions and Bbbbbbbbbbbillions
Posted by: Pecked to Death by Ducks | January 16, 2008 at 12:26 PM
Optimism is based on not recognizing the difference between numbers in millions and Bbbbbbbbbbbillions
Posted by: Pecked to Death by Ducks | January 16, 2008 at 12:27 PM
i would not call it optimism. rather, it's just realism. if everyone, or at least a majority, are accepting that a bear market of unknown length is here, then why be afraid? also, ive never felt the VIX was just a fear gauge and is just a much of an uncertainty gauge (which can be equated with fear). so if we are certain that the direction of the market is down, once again, why be afraid?
Posted by: Ryan | January 16, 2008 at 02:02 PM
In the summer the Federal Reserve did not act quickly and decisively so the VIX spiked up. Only until recently does it appear that the Fed is prepared to take action to deal with the current slowdown.
Mr. Market is not going take any aggressive short positions so long as deeper rate cuts are in the cards in the near future.
Posted by: Mark W | January 16, 2008 at 04:22 PM
I totally agree with Ryan. I think that people have come around to the view that it's going to be a long, grinding bear market. So you're not going to see these huge spikes in fear. And you probably won't see as much of the panic selling we saw in August. But you'll see selling.
Posted by: Greg Feirman | January 16, 2008 at 05:08 PM
Or is it just volatility being more volatile?
Posted by: cordura21 | January 17, 2008 at 01:38 AM