Realized Volatility At 20 Year Low – Chart Of The Week

Posted by on February 25, 2017 1:23 am
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Well, I would summarize the chart above in one of two ways. We are either witnessing the so called “Calm Before The Storm” -OR- the FED has distorted the market to such a degree that volatility readings are no longer relevant or reflecting of today’s market environment. At least for the time being.

Whatever the case may be, historically speaking, volatility readings can’t go much lower here.

About 4 weeks ago VIX briefly spiked to just below $10. Last time we saw VIX below $10 was in February of 2007. At that time volatility has bottomed at $9.70. We all know what happened shortly thereafter.

Here is another interesting data point. COT reports show that commercial VIX long interest (smart money) is approaching record highs. Now at 10X net long.

Now, many bulls would argue that VIX is no longer a reliable indicator and that it shouldn’t be followed. In fact, VIX’s “this time is different” crowd is growing larger by the hour.

On the flip side, today’s VIX/VXX lows might represent just that. A buying opportunity of a lifetime – in volatility that is.