I started using Technical Indicators, as an, "Aid," to several Trading Strategies. In addition to tracking three Indices, I have been monitoring the VIX. This morning I noticed the VIX is above 20. A median point of fear, indicating that Investors are shifting money to Options.
It seems likely the shift could be money migrating away from Treasuries. An auction, Treasury Yields are elevated more than I recall seeing in a long time, which means Investors are not bidding highly. But the Stock Market has been declining as well. However, I believe the Stock Market decline is a result of mounting turmoil. The Nation seems divided, The House is lacking a Speaker and World War III might be unfolding.
Regardless of what is causing the fear, the VIX crossed above twenty and is above the 20, 45, 90, and 120 day moving average. While twenty is not overly extreme, it signals fear is growing.
The VIX is an index that measures the expected volatility of the S&P 500, which is a stock market index that tracks the performance of 500 large companies in the United States. Volatility is a measure of how much the prices of stocks change over time. The higher the volatility, the more uncertain and risky the market is. The lower the volatility, the more stable and calm the market is.
The VIX is calculated by using the prices of options on the S&P 500. Options are contracts that give the buyer the right, but not the obligation, to buy or sell a stock at a specified price and date. Options are used by investors to hedge or speculate on the future movements of stocks. The prices of options depend on various factors, such as the current price of the stock, the strike price of the option, the time to expiration, the interest rate, and the volatility.
The VIX uses a mathematical formula to estimate how much volatility investors expect in the next 30 days, based on the prices of near-term options on the S&P 500. The VIX is expressed as an annualized percentage, meaning how much the S&P 500 would move up or down in one year with a 68% probability (one standard deviation). For example, if the VIX is 20, it means that investors expect the S&P 500 to move up or down by 20% in one year with a 68% probability.
The VIX is often called the “fear index” because it tends to rise when investors are fearful or uncertain about the market conditions and fall when investors are confident or optimistic. The VIX can also be influenced by other factors, such as geopolitical events, economic data, corporate earnings, and market sentiment. The VIX is not a direct indicator of the direction of the market, but rather a measure of its expected fluctuations.
The VIX is updated in real time by the Chicago Board Options Exchange (CBOE), and can be accessed through various sources, such as Yahoo Finance1, Investopedia2, or Bloomberg3. The VIX can also be traded using various instruments, such as futures, options, exchange-traded funds (ETFs), or exchange-traded notes (ETNs). These instruments can be used by traders to hedge or speculate on changes in volatility, or to diversify their portfolios.
