Wednesday, February 11, 2015

VIX up 37% while SPX is flat, house of cards or house of fear?

by Chris Kimble

performancevixspyhouseoffearfeb10

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Do some investors think the market is a "House of Cards?" Humbly I don't know. It sure seems like something has them concerned, as fear levels remain lofty with the market making little progress up or down!

Over the past 90-days the S&P 500 is pretty much flat (up less than 1%). During that time the VIX (Fear Index) remains elevated, as its been up the majority of the time the market has been going sideways.

spysidewayschopvixpennantfeb10

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The VIX looks to be creating a pennant pattern over the past few months. How this pattern resolves itself could point to which direction SPY heads out of this sideways chop.

vixreturnsafterup40percentin90daysfeb10

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This table highlights what happens to the VIX after its up 40% in 90-days when SPY is positive. Majority of the time 90-days out the VIX is lower.

Falling fear can be positive for stocks and for XIV. If the VIX falls during the next 90-days, XIV could do fairly weel. Let's see what happens from here!

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