Friday VIX Implosion Thoughts

• Posted by Adam Warner
• on October 9th, 2009

 

Well, there you almost have it. The VIX has just about gone from officially overbought (15% above it’s 10 day SMA last Thursday) to officially oversold (it needs another .20 as of this writing to close 10% below). That’s not an unprecendented flip, but it’s pretty quick to move that much around the moving average in a mere week and a day.

In fact, the VIX has dropped nearly 5.5 pts, or close to 20%,  from Monday’s brief blip over 29 to today’s mid 23′s.

Now again, Fear within a bull trend is fadable. Especially fear that mounted so swiftly last week on a far from scary selloff. Complacency within a bull trend, like we suddenly see again, is trickier. It can linger, not to mention it makes sense. The realized volatility in this market is not very high, and the selloffs in the move so far have been shallow and brief. So to me, the thing to look for if you’re determined to catch the turn is complacency at a time when it seems misplaced. It does not feel misplaced now.

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