The VIX just popped up Monday for a 24.91% gain even though there really isn’t any fear in the stock market at all.
In fact last week’s Investors Intelligence survey registered a record low number of stock number bears.
But the VIX popped up.
Take a look at the chart and it closed yesterday on trendline resistance.
It could end up “breaking out” of this resistance downtrend line this quarter even if it pulls back today.
But I don’t think that would mean the stock market is about to crash or a giant correction is coming anytime soon.
However, it could mean that the VIX is going to trade in a higher range than it did in second half of last year, which actually was a historically low range for the VIX anyway.
The VIX spent more time below $10.00 than it had ever before last year.
BTW – if you don’t know what the VIX is it is the premium that options traders are paying for volatility. When it is low it means they aren’t worried about downswings in the stock market.
When it goes up they get more worried, but it tends to go up towards $30 when there is true panic in the markets.
If the VIX breaks above $15.00 it’s likely to end up making establishing a slightly higher range than it did last year.
The $10.00 level probably will act like the $9.50 area did last year.
Why would this happen?
Well if you look at 2007 and 1999 and 2000 the VIX actually started to go into a slightly higher range in the last 6-12 months of those previous bull market cycles as a few people began to hedge.
We’ll see what happens.
