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Tag Archives: VIX

September 21, 2007

Let the healing begin! Stocks responded enthusiastically this week to the Federal Reserve’s dramatic half-point rate cut, with all the major indexes closing sharply higher. But the most encouraging news came from an obscure little indicator that measures investor anxiety.

Reaching for the Stars

When does it stop—or even just pause? Wall Street continued its seemingly unstoppable climb today, with the blue chip Standard & Poor’s 500 Index posting yet another new multiyear year high (its highest close since November 8, 2000, six long years ago).

VANISHING VIX

The stock market could use a breather. We’ve been rallying for almost four weeks now, and the gains have been impressive (about 7% as of today on the S&P 500).

AN UNHEALTHY PATTERN

As I write in mid-afternoon, the Chicago Board Options Exchange Volatility Index (popularly known as the VIX) has just hit a nine-week low. So what?

The VIX is a good yardstick of investor anxiety. When investors are fearful, options writers charge buyers a high volatility premium. As the mood eases into complacency, the VIX falls. It’s normal for the VIX to drop as the stock market rises. (Nothing like a rally to soothe folks’ nerves.) During the rally off the March lows, however, we’ve seen a pattern that troubles me.