If we’re going solely by indicators to tell us that our exchange traded fund (ETF) and economic troubles are nearing a close, one offers a ray of hope.
The Chicago Board Options Exchange Volatility Index, otherwise known as the VIX, rose 34% yesterday. The index is considered the market’s “fear gauge,” because it tends to rise as stocks fall, report Elizabeth Stanton and Jeff Kearns for Bloomberg.
The current reading is the highest since July 2002. According to Schaeffer’s Research, historically, after a big jump of 30% or more in the VIX leads to a bumpy ride in equities markets for the coming weeks and months. That period is then generally followed by a bullish tone for about 25-50 days.
The index is calculated from prices paid for options on the S&P 500. After the VIX peaks, stocks usually advance. After the 10 biggest percentage increases for the index, which is 18 years old, the S&P made gains over the following days and weeks.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.