FYI: What does it mean that the VIX is only barely higher than average, even as the stock market is experiencing remarkable volatility?
The VIX VIX, -9.21% is the CBOE Volatility Index. Though its calculation is complex — derived from the implied volatilities of S&P 500 SPX, +0.22% options maturing over the subsequent month — it is generally known as an “investor fear index.” Contrarians interpret high levels to be bullish and low levels as bearish.
That’s why many contrarians are concerned right now. The VIX currently is trading around 20, only slightly higher than the historical average of 19.26.
I have a simple message if you share the contrarians’ concern: Don’t worry.
That’s because the VIX has never deserved its reputation as a contrarian indicator. In fact, the stock market more often than not has performed better following below-average VIX readings than after above-average ones. That’s just the opposite of what you’d expect. (See accompanying chart.)
Regards,
Ted
https://www.marketwatch.com/story/theres-nothing-to-fear-from-this-volatile-stock-markets-low-vix-fear-gauge-2018-11-16/print
