S&P 500 making new highs but VIX is basically flat - Warning???
I am not a market expert, but based on what I understand this is typically not a good sign. Especially so when it is hovering right around the 30 level. Over the past several weeks news highs made a noticeable reduction in the VIX. The few lines I pulled from Investopedia (see below) seem to fit the situation pretty well IMHO.
I know, don't fight the Fed, but the market is different now than just a week or two ago. Since the bottom, I totally understand the bull run. Cheap stocks with lot of liquidity from the Fed. However, volume is way down and VIX is not falling like it was. I honestly do not know what to expect. I am just patiently waiting to see how things play out as May ends and June gets underway.
investopedia.com/articles/optioninvestor/09/implied-volatility-contrary-indicator.asp
While it is rare, there are times when the normal relationship between the VIX and S&P 500 change or "decouple. ... ... ... This is common when institutions are worried about the market being overbought, while other investors, particularly the retail public, are in a buying or selling frenzy. This "irrational exuberance" can have institutions hedging too early or at the wrong time. While institutions may be wrong, they aren't wrong for very long; therefore, a decoupling should be considered a warning that the market trend is setting up to reverse.
investopedia.com/terms/v/vix.asp
Created by the Chicago Board Options Exchange (CBOE), the Volatility Index, or VIX, is a real-time market index that represents the market's expectation of 30-day forward-looking volatility. Derived from the price inputs of the S&P 500 index options, it provides a measure of market risk and investors' sentiments.
I know, don't fight the Fed, but the market is different now than just a week or two ago. Since the bottom, I totally understand the bull run. Cheap stocks with lot of liquidity from the Fed. However, volume is way down and VIX is not falling like it was. I honestly do not know what to expect. I am just patiently waiting to see how things play out as May ends and June gets underway.
investopedia.com/articles/optioninvestor/09/implied-volatility-contrary-indicator.asp
While it is rare, there are times when the normal relationship between the VIX and S&P 500 change or "decouple. ... ... ... This is common when institutions are worried about the market being overbought, while other investors, particularly the retail public, are in a buying or selling frenzy. This "irrational exuberance" can have institutions hedging too early or at the wrong time. While institutions may be wrong, they aren't wrong for very long; therefore, a decoupling should be considered a warning that the market trend is setting up to reverse.
investopedia.com/terms/v/vix.asp
Created by the Chicago Board Options Exchange (CBOE), the Volatility Index, or VIX, is a real-time market index that represents the market's expectation of 30-day forward-looking volatility. Derived from the price inputs of the S&P 500 index options, it provides a measure of market risk and investors' sentiments.
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