Just How Low Can VIX Go?

Posted by on January 24, 2017 11:11 pm
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VIX is once again scratching the bottom of the barrel. This is an unusual development considering where we are today and how “unstable/unpredictable” today’s Twitter environment is.

“11.8 is more than one standard deviation away from the VIX’s long term average of 20. Additionally, the VIX rarely goes below 10. Statistically, 11.8 is an unusually low reading for the VIX,” said Nick Colas, chief market strategist at Convergex, in a note to clients.

“The VIX often visits its extreme point, high or low, for the year in January. And since we know 11.8 is not likely to the high point for the year, it could well be a low,” he said.

Here is another interesting fact. Last week’s COT Report shows that commercial traders (typically smart money) are building into a large long VIX position. Net 104K contracts long. This historically large long VIX position and today’s low VIX level typically precede market turmoils. At least that has been the case in the past or at previous VIX lows.

This area definitely demands our attention over the next few weeks/months.

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