Exchange traded funds that profit from rising market volatility remain elevated along with the CBOE Volatility Index as investors remain nervous over the global recovery, U.S. credit downgrade and Europe’s debt crisis.
The VIX has surged to the highs from 2010 but remains below the 2008 spike from the credit crunch.
Volatility is alive and well, and some analysts are warning that investors should get used to it.
The VIX did pull back on Tuesday after the Federal Reserve tried to soothe markets with a pledge to keep interest rates low until mid-2013. Stocks rallied Tuesday as the Dow gained more than 400 points. [A Flash Surge in the VIX? Not So Fast]
“The spike in the VIX above 30 last week signaled a transition…This phase of the cycle will end once VIX has descended back through the 25 level, which we would interpret as an all-clear sign for equities. In the meantime, we expect the most turbulent and unpredictable period of the volatility wave will play out over the next couple of weeks,” said Jim Strugger for MKM Partners, on Barron’s.
The VIX surged 50% on Monday, then Tuesday, dropped 27% to 35.06. The VIX is a measure of implied market volatility based on S&P 500 options. [Volatility ETFs Thrive In Traders Market.]