Is a fear surge coming? (yahoo) The CBOE Volatility Index – The VIX – is up 20% in the past week and is currently trading near 17. Thats the highest its been in over a month. The VIX measures the expectations of volatility in the benchmark S&P 500 index over the next month. Though a large move up in the markets raises volatility, the VIX is sometimes referred to as the Fear Index because a large move down also raises volatility. JD: Remember what Ken Fisher says: Stocks can actually rise dramatically in volatile markets. The most volatile year ever was 1933. Standard deviation was 52.9% but stocks rose 53.9%. In 1998 volatility was around 22% yet stocks rose nearly 29%. Look at volatility as a source of opportunity, not something to be afraid of. Im on the fence on this one. It is my belief the vix is indicating continue drops in the market. (So be prepared to see the value of your portfolio continue to drop) HOWEVER, underlying ECONOMIC measurements continue to show a strengthening economy. So, any drop will probably be short lived. Again, I have to support Ken Fishers assesment that we are in a bear market in a bull cycle. The drop certainly creates oppurtunities to buy and as a prudent investor you WILL want to take advantage of this. Note the correlation between the VIX index and the S&P performance in the chart below. Also note the consistent channel the vix has been in in recent history. How long does this chart indicate a down period in this market will last?
Posted on: Sun, 16 Mar 2014 07:26:16 +0000
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