VIX Correlation

There are many indicators out there for helping to inform which way the markets are headed. None of them are perfect, or exact, or even able to be taken into account alone and without context.

This week I discuss the CBOE Volatility Index (VIX) and how it’s negatively correlated with the equity markets.

The fact that it’s at extremely low levels right now makes me concerned.

Take 2.5 minutes to watch/listen to my video

TRANSCRIPT:

This week I’m thinking about volatility index. I mentioned two or three weeks ago on my annual preview, that I was concerned that the, Vix, the “V,I,X,” which is the volatility index is very low. So I’m going to throw up a couple of charts up on the screen here. So that you can kind of see that when the market has a tendency to go down, volatility dramatically goes up. It doesn’t necessarily mean that one is a leading indicator versus a lagging indicator, but they are, they are correlated. And it’s something that I kind of watch for. If you look at April of last year, April of 2010, they really start, the volatility dramatically goes up right as the market through April, May, and into June, really, really wasn’t very good.

As I throw up a 5 year chart, you can see that at various times, the same thing happened. That the volatility goes up when the market goes down. And so the fact that it is down right now does not mean, it being down, the Vix is at a very low number, it’s between 16 and 17, right now, then it does not mean the market is going to go down. As a matter of fact, with quantitative easing, I would actually argue that the market is going up because of the quantitative easing. It may continue to go up. This is just one of the things to watch for.

A client asked me the other day, you know, what are some of the indicators that I use, and I look at, etc.? And I have to tell you, it is not just one. It is many many, many different technical indicators. It is many, value of the whole market, but you know, for me, if you’ve been watching my videos, diversification. Because even if you are wrong on the indicators you’ve got to be very very well diversified in many different asset classes, etc.

Anyway, I just wanted to talk a little about the Vix, how very low it is and how it correlates with the market many many times.

My name is Mike Brady. Cambridge Investment Research, is my, I’m a registered rep of. My company is Generosity Wealth Management in Boulder, CO. My phone number- 303.747.6455. And you have a wonderful week, bye bye.

 



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