If you view the business stations or browse the financial websites you’ll discover the large account is how reduced market volatility (VIX) happens to be, which this type of reduced quantity (that will be type of uncommon) isn’t balanced for areas. From the specialized perspective, this isn’t correct. Actually, there increase may proceed to a VIX means shares.
It is when the VIX is in an uptrend that markets tend to be in trouble. But if you follow trends as I do, then looking at the longer-term time frames we see the continued pattern of lower highs and lower lows, which portray a bearish trend for volatility.
This is a major sentiment event for markets. Large Institutional investors are relying on VIX and other trading tools to help determine the timing of trading money in markets.
Is it safe to get back with the VIX around 10%? This perception in the business enivroment is for a potentially unstable condition.
If you remember few weeks ago when VIX was hovering around the same level and the markets were hammered? The bulls were rounded and VIX rose 43% at that day. the 7th biggest move in financial history.
Yet, much of that loss was recovered within a few days, and just a week later the S&P 500 was rising past the old highs and is higher still. That was an opportunity, but as short term as any we have seen of late: only one day! Like endless others, if you blinked, you missed it.
The Financial History shows low volatility is not quite sustainable; eventually, buyers exhaust and then all we have left are sellers. The idea here is to buy protection as price ranges widen, markets move sharply in both directions, with more volatility prices tend to move down with more vigor.
Further, low market volatility means option prices are cheap, so buying protection for a portfolio by using puts or selling calls is an inexpensive means of buying insurance (in case of a disaster). While the obsession over a low VIX has many concerned, we are not all that worried yet. That is because it is the term structure that is more important.
Overall, a low volatility index may be worrisome, but it is by no means a reason to shift gears if the market (price action) does not reflect the sentiment. Stay with the trend, be flexible and ready to move if things change.