Tuesday, August 14, 2012

What Happened The Last Two Times VIX Closed Below 15%?

What Happened The Last Two Times VIX Closed Below 15%?

Tyler Durden's picture
Submitted by Tyler Durden on 08/14/2012 13:48 -0400



VIX has only rarely traded below 15% during 'new normal' times. The period from 2004 to early 2007, the so-called 'Great Moderation', saw VIX average 13.6% - at the time stunningly low (and notably where VIX closed yesterday). While looking at VIX alone can be misleading (with regard to the term structure differences and realized vol premia), it is nevertheless a gauge of market's expectations of return volatility in the short-term - however contemporaneous that is. Following the two times that VIX first closed below 15%, the S&P 500 has suffered from a 5.25% and 7.75% plunge in the following two months - and each time saw a quick post-VIX-plunge pop in stocks that provided better entry levels for shorts. High Yield credit also stumbled hard widening 80 and 150bps respectively.

Longer-term VIX has only rarely traded at these levels...


and the last two times showed significant retracements in April 2011...


and March 2012...

and should you be looking for a position, it would appear the S&P is a 'better' short (given its richness to high-yield credit)...


Charts: Bloomberg
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Tue, 08/14/2012 - 13:50 | 2704365 realtick
realtick's picture
The INVERSE VIX is setting up for a devasting collapse lower:
http://chartistfriendfrompittsburgh.blogspot.com/2012/08/brace-for-impac...
Tue, 08/14/2012 - 14:13 | 2704451 vast-dom
vast-dom's picture
charts are essentially meaningless today. why? QE, ZIRP, shadow QE, shadow books, algos, you fucking name it! if we were to study charts we'd be at SP below 800 last year! It's ALL fucked!
Tue, 08/14/2012 - 14:15 | 2704469 ATG
ATG's picture
Capitulation wet towel anyone?...
Tue, 08/14/2012 - 14:23 | 2704498 eurusdog
eurusdog's picture
Until they aren't. The planners can only hold the line so long.
Tue, 08/14/2012 - 13:51 | 2704371 Thomas
Thomas's picture
I don't short--too dnagerous for amateurs.
Tue, 08/14/2012 - 13:59 | 2704404 cifo
cifo's picture
How do you make money then?
Tue, 08/14/2012 - 14:01 | 2704406 Aziz
Aziz's picture
Long precious metals?
Tue, 08/14/2012 - 14:20 | 2704491 PiratePawpaw
PiratePawpaw's picture
Silver, copper, lead, and brass.
Tue, 08/14/2012 - 13:52 | 2704374 francis_sawyer
francis_sawyer's picture
Pennies in front of a steamroller...
Tue, 08/14/2012 - 13:52 | 2704378 saturn
saturn's picture
This time.. is different.
Tue, 08/14/2012 - 13:54 | 2704382 francis_sawyer
francis_sawyer's picture
All your volatility are belong to us...
Tue, 08/14/2012 - 13:56 | 2704387 The Axe
The Axe's picture
All the instruments that effect VIX are flawed...dangerous and broken...draw no conclusions from there sick existence!!!
Tue, 08/14/2012 - 13:56 | 2704388 mrktwtch2
mrktwtch2's picture
im long some tvix from an avrg price of 2.68..looking for a run to 4 hopefully by late next week..stop loss is at 2.14
Tue, 08/14/2012 - 13:58 | 2704396 Hype Alert
Hype Alert's picture
The market is more broken today that it was back then. Fewer algo's co-located on the floor. There were fewer victims of the FED policies back then as well.
Tue, 08/14/2012 - 14:06 | 2704424 NEOSERF
NEOSERF's picture
Yes but look at each successive spike afterwards, they get smaller and smaller so QE is WORKING...warm up the helicopters...
Tue, 08/14/2012 - 14:09 | 2704434 DR
DR's picture
Everyone is waiting for Europeans to come back from their vacations to resume the Euro crisis.
Tue, 08/14/2012 - 14:10 | 2704438 slaughterer
slaughterer's picture
Russell 2000 is the index to short, IMO, when the time comes.
Tue, 08/14/2012 - 14:14 | 2704459 ATG
ATG's picture
Rolling over as we speak:
http://stockcharts.com/public/1439695
Tue, 08/14/2012 - 14:11 | 2704440 SheepDog-One
SheepDog-One's picture
Just means the markets have been taken over totaly at this point. I dont expect any 'market forces' to manifest in these conditions.
Tue, 08/14/2012 - 14:37 | 2704445 ATG
ATG's picture
Nice catch TD.
Any market crash may be blamed on Algobot HAL software sabotage with HFT volume drying up.
Oh:
http://www.businessweek.com/news/2012-08-14/knight-software
JEF et al KCG preferreds may be a good deal. Or not.
Did we mention we still got dem SPY puts?:
http://richcash8tradeblog.blogspot.com/2012/07/rich-cash-overnight-options.html
Tue, 08/14/2012 - 14:14 | 2704454 Dr. Engali
Dr. Engali's picture
I miss the days when the vix hit 80, the market was alot more interesting then. Now there's more excitement in one episode of Dora the Explorer than there is in a whole month's market action.
Tue, 08/14/2012 - 14:35 | 2704527 Tsar Pointless
Tsar Pointless's picture
Fantastic reference, Dr. Engali!
As somebody who was once forced to watch Dora cartoons while babysitting, I can fully appreciate your comment.
Markets. Funny - all I see are psy-ops weapons.
Tue, 08/14/2012 - 14:45 | 2704580 vrabobabo
vrabobabo's picture
not for shorters, they suffer. I am sure they would like to feel like Dora.
Tue, 08/14/2012 - 15:13 | 2704709 RunningMan
RunningMan's picture
I'm the MAAAAAP!
Tue, 08/14/2012 - 14:20 | 2704490 slaughterer
slaughterer's picture
S&P 500 looks like it is on the path to 1422/1429. No shorts until then.
Tue, 08/14/2012 - 14:39 | 2704539 Nicosxm
Nicosxm's picture
Agreed with you.... this could be a bear trap for now.
Tue, 08/14/2012 - 14:40 | 2704542 Nicosxm
Nicosxm's picture
Agreed with you.... this could be a bear trap for now.
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