VIX, often referred to as the fear index, continues to decline to levels unseen since the 2007 or right before the collapse. While most market pundits dismiss this measure as a simple volatility gauge, it would pay big dividends to pay closer attention. Here is why.
- Historic Lows Indicate Trend Reversal: Historically, when VIX approaches historic lows it tends to reverse shortly thereafter, typically leading to massive sell offs synonymous with 1987, 2000, 2007, etc…. Suggesting today’s environment is very dangerous.
- Shows Complacency & Excessive Risk Taking: I continue to maintain that the amount of risk taking in our financial system is off the charts. Although it is hard to see due to “Asset Inflation” and “Massive Stimulus”..… it is there. Plus, with most speculators being in a comfortable and soothing state of sleep (due to lack of volatility), a sharp bear market move here might snap everyone back to reality.
- Combining VIX, Cycle Work, Seasonality and Fundamentals: While looking at VIX alone won’t allow you to predict anything, combining it with other measures can give you a fairly accurate picture of what is to come. With market internals deteriorating, 5-Year cycle now complete, “sell in may and go away” and extreme levels of fundamental overvaluation/speculation, VIX suggests a violent move.
Conclusion: Considering all of the above and with VIX at $11.77, this is a clear recipe for a disaster. The only question is when. If you would be interested in learning exactly when this bear market will start (to the day) and its subsequent internal composition, please CLICK HERE
