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VIX Back Home

Author: James Brumley (info)
Website: http://bluegrassportfolio.com
Posted: August 17th, 2007 at 5:34 am EST
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For those of you who were following the VIX in the late 90’s and early 2000’s, you’ll know the normal reading was anywhere between 20 and 40. Beginning in mid-2003, the VIX sank under 20 and would stay there for the next four years. In less than a month though (the last month, to be specific), the VIX is back at home, hovering in its 1997-2002 range.

S&P 500 with VIX, 1997 to 2007 - Weekly

Now, here’s the same chart, but with a slightly different line drawn. Thursday’s high for the VIX was 37.50. Were you aware the VIX has moved to 37.50 or higher seven times? Plus, you could almost argue it had only happened five times, as two of the incidences were close enough to a previous instance that it could be counted as one (1998 and 2002).

S&P 500 with VIX, 1997 to 2007, plot at 37.50 - Weekly

Regular readers may recognize that we follow the VIX more on a relative basis than on an absolute basis. However, either way you slice this, the VIX is WAAAAYYY up there - ripe for a retreat. As such, stocks may be ripe for a rebound.

As with the new low case, take it however you want it. Maybe the VIX is set to keep moving higher, as it has before. But, we it can’t keep moving higher forever, and probably not for much longer.

We’ll look at some more details next week. Have a great weekend.

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