Advertisement
Advertisement
trade360
BREAKING NEWS : Start Trading Today Join Now!
Advertisement tickmill

VIX Shows Elevated Fear Among S&P 500 Traders, But Not Yet at Post-GFC Peaks

Written By Joseph Trevisani | 2018-10-11 15:36:35 GMT

Interestingly, the tech-heavy Nasdaq index (-1.2% as we go to press) is outperforming the more traditional large-cap indices after seeing the worst performance yesterday, but when it comes to US stocks, there’s nowhere to hide. All 11 sector SPDR ETFs are falling on the day, with Energy leading the way lower at -3% as WTI sheds 3.5% on the day.

That said, we are seeing some differentiated performance among other asset classes, unlike yesterday. High-quality bonds are on the rise, with yields on the benchmark 10-year Treasury falling 4bps to 3.13%. Perhaps most impressively, the long-maligned “useless yellow rock” has quietly broken out of its two-month range to trade up near $1225, its highest level since late July.

Not surprisingly, this week’s market disruption has led to a big surge in the CBOE’s Volatility Index, Wall Street’s so-called “fear index.” The VIX measures the market’s expectation for volatility over the next 30 days, using the implied volatility of the front two months’ put and call options on the S&P 500.

While the calculation itself would put most readers to sleep, the current VIX chart is worth watching. After hitting historic lows under 9 through last year’s consistent rally, the VIX exploded to a peak above 50 amidst the last major interest-rate-driven market disruption in early February. After settling back down into the low teens throughout Q2 and Q3, the index has surged to peak near 29 so far today.

What does that tell us? For one, traders are not (yet) pricing as much volatility as they were in early February; colloquially, you could say that traders are not as “scared” as they were back in February. It would likely take another day or two of strong selling pressure to reach a peak in the 48+ range that has marked significant bottoms on four occasions (May 2010, August/September 2011, August 2015, and February of this year). That said, we’ve seen plenty of near-term market lows form with VIX readings in the 25-30 range, so we may well see a bottom form in the coming days.

While its notoriously difficult to trade, the VIX can provide a real-time gauge of the amount of panic in the US stock market; based on the current reading, traders are clearly wary, but fear has not yet reached the post-GFC peaks that marked major longer-term bottoms.

Author

By Joseph Trevisani
markets

Featured Forex Brokers

Broker Profile Open Account
XM
  • Minimum Deposit: 5 USD
  • Leverage of up to 1:30
  • Leverage applies to all EU regulated entities of the group. Leverage depends on the financial instrument traded.
  • Broker Type : Market Maker
  • Regulation : CySEC,ASIC ,FCA
  • XM
    tickmill
  • Minimum Deposit: 25 USD
  • Leverage of up to 1:500
  • Broker Type : ECN/STP & STP
  • Regulation : FSA SD008
  • tickmill
    markets
  • Minimum Deposit: 100 USD
  • Leverage of up to 1:500
  • Broker Type : Market Maker
  • Regulation : CySEC
  • markets

    The Best Crypto to Crypto

    Exchanger Advantages Open Account
    binance
  • Safety Stability: Multi-tier & multi-cluster system architecture
  • Binance charges a quite low commission fee
  • Multiple-Coin Support : BTC, ETH, LTC, BNB...
  • High Liquidity
  • Multiple-Language Support
  • binance
    changelly
  • Instant cryptocurrency exchange
  • More than 500,000 satisfied users
  • Changelly charges a quite low commission fee
  • Safety Stability
  • changelly
    bitmex
  • Bitmex - Bitcoin Mercantile Exchange is a cryptocurrency derivatives trading platform.
  • Bitmex charges a quite low commission fee
  • Safety Stability
  • changelly

    Best Brokers to Trade Crypto

    Broker Profile Open Account
    XM
  • Minimum Deposit: 5 USD
  • Leverage of up to 1:30
  • Leverage applies to all EU regulated entities of the group. Leverage depends on the financial instrument traded.
  • Broker Type : Market Maker
  • Regulation : CySEC,ASIC ,FCA
  • XM
    FBS
  • Offer: 50USD No Deposit Bonus
  • Offer: 100% Deposit Bonus
  • Minimum Deposit: 1 USD
  • Leverage of up to 1:500
  • Broker Type : Market Maker
  • Regulation : CRFIN (Russia), 009069697 IFSC (Belize), IFSC/60/230/TS/12
  • FBS
    eToro
  • Offer: 1000USD Deposit Bonus
  • Minimum Deposit: 50 USD
  • Leverage of up to 1:400
  • Broker Type : STP
  • Regulation : ASIC, 335692 CFTC/NFA, 0382918 CySEC, 109/10
  • eToro

    Contact us
    Email: reviewbrokers.net@gmail.com
    Skype:fxvnpro