What is the VIX?
Tonight, Iâ€™d like to give you a “heads-up” concerning the VIX.
The VIX (the Chicago Board Option Exchangeâ€™s volatility index) is becoming an increasingly popular indicator in the financial press. Reporters have been quoting so-called option gurus who say the VIX is high and the market is likely to reverse.
While this may be true, the VIX is absolutely not a timing mechanism unless accompanied by other signals. In mid-September, for example, the VIX was in the high 40s and 50s! Had you listened to the chant that it was “too high, and stock market has to rise,” you would have been decimated when the Dow tumbled to new lows in October. The next time you read the VIX is “too high,” be careful.
Markets to watch: In the futures markets, todayâ€™s massive move in the energies took care of the low-volatility situation that was originally mentioned by Dave Landry Friday in his “Trading Outlook.”
In stocks, the airline index–especially [UAL>UAL] and [AMR>AMR]–is overdue for a large move. Multiple-day readings on both the 6/100 and 10/100 calculations suggest an explosive move is imminent.