Friday, October 10, 2008


We're making history all over the place, and that includes the VIX as well. Notice at around 2PM, the VIX broke out of all-time resistance and proceeded to spike, hitting a high of 64.92. The amount of fear is incredible and will remain elevated for sometime. Given the global situation and the unknown duration of this crisis, I'm not sure if the VIX will ever see 30 or below again unless the crisis shows signs of subsiding. This will not happen anytime soon so expect the VIX to remain at elevated levels.

VIX - 1-day

I profiled the VIX while it was in it's only consolidation level in 5 years. The next day, the VIX broke out 30%+. The short-term end to this spike will be signaled by either 1) a bearish gap up, 2) a large bearish engulfing pattern, or 3) a doji top (presumably long-legged). This will also mark the short-term, capitulated bottom in the stock market.

VIX - Year-to-Date

Notice how we've made all-time highs since the VIX was created. We've exceed fear levels in every major market crash/economic crisis. This just shows you how scared people are...and they have every right to be.

VIX - Since Inception

Don't forget to try out the Free Trend Analysis. It's FREE, so give it a shot!


Anonymous said...

how is the vix number being calculated? is it based on the amount of calls and puts ratio? or when dow plunge the vix number will rise accordingly?


John C. Lee said...

the price of calls and puts calculate implied volatility and the VIX is expected volatility in the future.

the price quotations of nearby and secondary nearby S&P 500 Index options with various strikes are used.