Watching the VIX (Volatility)

When looking at the stock market, one can use the VIX as an indicator of what to expect.  Although, at first glance, it appears to just be an inverse of the market, it can give you an idea of what to expect.  Take today’s VIX chart.  It clocked in at 20.61, which is low given the issues in the market of recent years.


VIX Chart by

If you look on the chart the Directional Movement Index (DMI) has the green line above the red and the black (trending) line slightly canted up.  The Williams %R (an Overbought/Oversold) indicator is also above the oversold line.  If you we’re looking at this as a stock, you might think it is poised for a ‘buy’ signal.  This is the exact opposite.  It is still below the 50 and 200 Moving Averages, so it could keep going lower, however, given the significant move in the market to date, it may be time to position yourself for selloff.  It may be short lived, but I would try to be slightly negative deltas with a plan to continue capitalizing on a move down, should it happen.

Please pay attention to the VIX, learn about Volatility and always hedge and actively manage your portfolio!

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