Posted by Jack Lee
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As early as last summer the idea of the VIX staying above 50 was almost laughable, it seemed so unlikely. But, nobody is laughing now, in fact people on Wall Street are getting down right scared. For more than 5 weeks the VIX chart has been above 50, and 30 was considered high! The VIX has not stayed this long above 50 since the Great Depression and this has a lot of folks worried and rightly so.
The VIX indicator is a forecasting tool and it’s telling us the market will likely move up or down 3% in a day and the market has been moving 3% in a day. This kind of extreme volatility has chased major players away from options and the stock market. It’s also has taken its toll on the average stockholder who has been slow to take money out of the market, hoping it will turn around and thus recoup losses. Even these buy and hold types are fading fast.
Analysts expect the VIX to stay high until at least January. As the market shakes out the weak kneed players stability will gradually return, but when and where the bottom will be nobody knows.