You’ve Been VIX-ed

• stevenplace
• November 9th, 2009

So what happened to all of that panic? It wasn’t but a week or two ago in which we were seeing a large bidup in options premium, as investors and traders were paying extra for protection– we were potentially looking at a more volatile environment going into November.

Well the VIX “breakout” came and went, and we’re now approaching oversold levels. The chart above has a standard Bollinger Band overlaid on the chart– notice the last few times when the VIX has closed above the upper band:

• 8/17
• 9/1 – 9/2
• 10/2
• 10/30

All of these have been at or near the intermediate term pivot lows. I don’t necessarily buy into this as a “holy grail” pattern, but it is evidence that anytime a little more fear comes into the market, it is quickly erased by a large bidup in risk assets.

An interesting study coming out from Rob Hanna– he takes a look at what happens to the market when the VIX goes from overbought to oversold quickly in the context of an uptrend. There’s a slight edge:

My thesis remains that we are in a rangebound market until proven otherwise.

Disclosure: My clients, subscribers, and I have positions in some equities.

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