They do not expect a lot of volatility in the markets and feel more confident. 1) Just because the VIX is low doesn’t necessarily mean the market can’t continue to move higher — a lesson illustrated vividly by various data points above and the entire 2004-2006 period. How does the Volatility Index (VIX) work? The same top and drop scenario happened in 2011. There is also a misconception that the VIX value is a one-for-one estimation of the percentage change expected in the S&P 500. The VIX has tended to explode upwards in response to a sharp decline in the S&P 500 Index (SPX). Low VIX is not a causal factor for an SPX collapse, but an SPX collapse is a causal factor for high VIX. “Be careful if you think the VIX has nowhere to go but higher”….the VIX has a history of remaining depressed during long periods of time — like they did between 2004 and 2007 when stocks slowly drifted higher. The CBOE Volatility Index (VIX) is a measure of expected price fluctuations in the S&P 500 Index options over the next 30 days. At VIX Trader, we don’t care because we plan to feast when volatility spikes, as it inevitably will, but here are the facts as they stand today. I think we can dig deeper than that. But the corollary scenario of the market falling in response to low VIX levels has not tended to occur. What does a low VIX mean for stocks? When the VIX moves out of complacent territory and back towards its mean, then the market is … VIX (blue, left axis) vs. S&P 500 (red, right axis) So why does this matter? VIX/S&P 500 in 2010. The VIX represents the S&P 500 index +/- percentage move, annualized for one standard deviation. Based on Exhibit 2, ... based on recent volatility and VIX, which comprises first, a mean reversion adjustment and second, the difference between VIX and expected VIX. This is one indicator that doesn’t work as well on bottoms as it does on tops. Naively, if the VIX index is low, one would expect the volatility in the market several months in the future to be low. We could interpret that to mean that we have 30 days of low volatility ahead of us; well at least that’s what the traders of the SPX (S&P 500 Index) are leading us to believe. On April 12, 2010 the VIX fell as low as 15.23. When they expect low volatility, they also assume rising stock prices. VIX Spike Could Mean Near-Term Stock Weakness Not only has the VIX doubled year-to-date, it has doubled off its low over the past month. Devised by the Chicago Does a low VIX equate to a market pullback? Does VIX Predict Future Volatility?” provides market participants with ... price changes over 30-day periods after a low VIX, after a high VIX, and after a normal VIX. VIX/S&P 500 in 2011. VIX continues to plumb new lows. In the wake of Twitter rants and and nuclear missile tests, the stock market has succeeded in doing something it hasn't done in almost 2.5 decades.The VIX is at its lowest point in 24 years. For those interested in what the number mathematically represents, here it is in the most simple of terms. VIX and Stock-Market Behavior . A low VIX doesn’t necessarily mean the stock market is nearing a top—or even a speed bump. The VIX closed at a low today, not seen since July 7th, 2011. Ron DeLegge, ... Low VIX readings, in fact, are indicative of complacency, which almost always leads to declines that surprise the market. So what does that mean? … The predictive nature of the VIX makes it a measure of implied volatility, not one that is based off historical data or […] Since the VIX level at any point may be naively interpreted as a prediction for the The VIX is back to the low levels we saw last summer/fall before a nasty decline ensued. What does a low VIX mean? 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