By Doug Short (Guest Post)
Let’s review the recent volatility in the S&P 500. The first chart features an overlay of the index and the CBOE Volatility Index (VIX) since 2007. On Aug. 8, the VIX rose to 48.00, a gain of 50% over the previous close. As the chart above illustrates, the correlation between the S&P 500 and the VIX is inverse but imperfectly so. The lower low in the summer of 2008, when the index nearly dipped to 1200, came with a lower VIX in the upper 20s. More significantly, the unprecedented surges in the VIX above 80 in late 2008 predated the actual index low by over…
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