3 Shocking Volatility Charts That Foretell The Future

Posted by on March 4, 2017 12:14 am
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There were two important factors hidden in today’s weekly update.

  1. COT Reports suggest that commercials (smart money) have considerably increased their long exposure in VIX. It is now approaching a record level not seen since July/August of 2015 and December/January of 2016. To be exact, their net long exposure is now at 110K contracts.
  2. VIX is once again approaching record low levels and is getting ready to close its final gap up from a few weeks ago. In fact, as of Friday’s close it is just 14 cents away. Once closed, VIX can fly again.

S&P 500 Realized Volatility chart can be summarize 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.

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.