Obscure Index Helps Measure ETF Investor Sentiment | ETF Trends

The stock market has been through a few nosedives, free-falls and sharp reversals, sending stocks, investors and exchange traded funds (ETFs) on a wild ride.

Whatever you want to call the swings, there is a way to measure this: the VIX, otherwise known as the Chicago Board Options Exchange Volatility Index. Basically, the index measures volatility or market swings.

Once an obscure measure of market tumult, it’s been thrust into the spotlight as investors look for a way to gauge the day-to-day sentiment on Wall Street.

A rising VIX is usually regarded as a sign that fear, rather than greed, is ruling the market. The higher the VIX goes, the more unhinged the market looks, explains Michael Grynbaum for The New York Times.

On Friday, the VIX rose to 70.33, its highest close since its introduction in 1993. To some experts, that suggests that the wild ride is far from over and it indicates a huge amount of fear in the market place. Some traders think the media has actually added to the fear and anxiety that the VIX is meant to reflect. The VIX can be a self-fulfilling prophecy and it is certainly not helping matters – it could be fueling the fear fire.

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.