VIX is arguably the most critical indicator for recognizing the market environment. There are no absolute highs and lows for the VIX, but it is mean-reverting. This is natural for volatility. This year, we are in a volatile environment where VIX 15 – 17 represents the lows. Needless to say, those lows are associated with short-term or intermediate-term highs in the stock market. This is where we are right now. S&P 500 is basically at all-time highs.
Here is the chart of VIX:
I don’t think this time will be any different. We are approaching some downside action in the market. The extent of it is unknown, but it may surprise us on the volatility side, given that VIX futures are pricing in a sharp increase in volatility.
