As stocks fall to new lows, it’s natural to start looking for a bottom. Conventional wisdom is that lows are often made in a selling climax and capitulation as the last bulls throw in the towel.Bottoms are often signalled by a spike in volatility, high put/call ratios, big down to up volume ratios, and large numbers of individual stocks making new lows. Let’s look at the VIX (the CBOE’s measure of implied volatility of SPX options) to see what it says.S&P futures have broken November lows, and trade in chaotic, near freefall fashion for part of yesterday’s session.The chart below is a daily chart of the VIX in the top pane, and a daily line chart of the S&P in the bottom.The VIX has formed a big triangle, and is trying to break out to the upside today, depending on where you draw the upper line.If a bottom is associated with a spike in the VIX, the last two VIX highs have been over 80.Looking at late 2008, a new price low in the S&P had a lower high in the VIX.With this being a third lower high for the VIX with a new price low, are investors getting complacent, or is this a divergence?I’d say the VIX is indicating the low isn’t in.For more analysis of how the VIX and stocks have interacted lately, visit Bill Luby’s VIX and More blog here
Daily VIX Chart
.gif "Whats the VIX Telling Us About Stock Prices?")
Copyright 2009
This feed is for personal, non-commercial use only.
The use of this feed on other websites breaches copyright. If this content is not in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint:
f2ea78dd95959aa32f651cec20a16e23)
