VIX is suspiciously low
Vix is down by 13% over the past five days at $15.43 as investors are scratching their heads trying to figure out why it is so low.
On September 20 Vix was at $25.71, highlighting the substantial fall seen in recent weeks.
Having dipped below $15 on Friday, Vix, known as the Chicago Board Options Exchange Volatility Index, was at its lowest point since before the pandemic.
VIX from 29 to 16 in a month— Helene Meisler (@hmeisler) October 15, 2021
Historically, Vix dipping to this level suggests that stocks will rise.
US markets flying right now!!— G-Unit💪 $POD.ax=PGM's $VAR.ax=Zinc $BSX.ax=Ni (@Akdjnr1) October 15, 2021
Good night 👍 pic.twitter.com/Ho7iepnjhH
The dip in the Vix came as the S&P 500 reached another all-time-high towards the end of last week, eclipsing the record set on September 2, as the US index posted its third straight weekly gain.
Vix is a real-time market index which represents the market’s expectations for volatility over the next 30 days.
The Vix index moves up because professional investors are reacting to increased price volatility in the S&P 500 specifically, but also wider markets.
The index is used by investors to judge risk levels, fear, and stress in the market when making decisions.
The S&P 500 has been flying since the pandemic hit in early 2020, adding 33.64% in the last 12 months, as the US put in place stimulus measures to support the economy.
Analysts previously made the case that the US stock market may have run its course, expecting Vix to climb to above $40.
3X the $vix crossed 50 day SMA (green line) it spiked with a blow off top than continued to fall. If we are going to see my $42 price spike by month end it will need to not blow its top. The 2nd chart shows the short 3 mini-spikes peak from $22.35 up to $24.80. That seems like a pic.twitter.com/FQAXdjGzDB— Andrew Kittle (@AndrewKittle4) September 8, 2021
However, that proved not to be the case, adding to the suspicion around Vix’s current low level.
Things could become clearer next week as four out of five FAANG stocks will release the earnings reports, which could test the S and P 500’s recent rally.