(Find out why) Markets Don’t Trust This VIX Level

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Wednesday was yet another wild one.

One day after dropping 30 points somewhat out of the blue, the S&P 500 rallied about 50 points.

The index is still moving at nearly 2% a day on many days.

However, when it does not move it REALLY doesn’t move, which is holding down its GARCH HV number.

Even so, realized volatility (another name for historical volatility) is over 25%.

Thus, if you want to know why the VIX is still nearly 30, take a look at how much the S&P 500 is moving.

The answer is: the VIX should be about where it currently stands, if not higher.

To make matters more interesting markets do not trust the current VIX level.

VVIX, the VIX of VIX is over 120%.

Under ‘normal’  circumstances 100 is astronomically high.

We are now 3 months into the real beginning of the Coronavirus Sell off of 2020.  

Markets based on VVIX seem to think there is plenty of time left for the crisis to play out, otherwise VVIX would be under 100.

In addition, I continue to be nervous about the higher VIX with a higher S&P 500.  Does not pass the smell test.( Nervous about what? The market going down or VIX being wrong? You switch a lot on context)

The VIX Traffic light is Orange (3 out of 4 indicators are Red, ONE is yellow).

Your Only Option,

Mark

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