Volatility Is Back Just When It Is Supposed To Be
There is no doubt about it. Volatility is back. The CBOE Volatility Index (VIX) has risen from 12 to 24.81 before settling yesterday at 16.91. It is higher today.
Here is a great way to think about the VIX.
When the VIX is low it is time to go. When the VIX is high it is time to buy.
The VIX is a measure of implied volatility of options on the S&P 500 over the last 30 days. In other words, are people paying more for puts. The chart above clearly shows you that when the VIX is above 20 stocks are in trouble. So we are out still in the trouble neighborhood even as I write. The VIX today is at 18.07 as I write.
Another measure we like the range of the Erlanger Value Lines. The levels are resistance, pivot and support. These levels are calculated each day. The only time these measures exceed the average over the 8 years is when the stock market is moving lower.
Today's wide trading ranges will keep this going next week.