Have you seen the VIX?

November 21, 201812 Comments

The VIX (often called the “fear index”) has moved from the status of being suppressed for most of last year into it’s more typical volatile status in 2018. Interestingly – in 2017, the market was so low in volatility that the VIX hovered near 9-10 for the better part of that year. This was an historic anomaly. It has never happened before for that type of extended period. See the chart below and take note of that extended low-VIX levels period in 2017.  Despite the unrealistic likelihood of such low volatility continuing, traders and ordinary investors bought inverse VIX ETFs enthusiastically.  Sometimes with three times leverage.  This was a myopic move- investors were foolishly betting that volatility would stay low for an eternity.

Suddenly, January 2018 came along. Markets fell hard. Then they rallied. Then fell again in February. Volatility had returned. Investors who owned inverse ETFs lost their shirts last winter -particularly the ones who bought a leveraged inverse VIX products.


Amazingly, some of them decided that they should approach the manufacturers of inverse ETFs with death threats. I’m not making this up. Apparently, buying leveraged inverse VIX ETFs are a display of investor brilliance when it works.  If they blow up-  it’s no longer the investors fault. Instead – it’s a cleverly disguised high risk speculation aimed at deceiving investors. You see, society has taught us that whenever we make a mistake – it is not our fault. A drunk who orders too many drinks in the bar can blame the bartender for their DUI ticket. The addict can blame society rather than his own life decisions. Cheating spouses blame their spouses for forcing them to cheat.

Ok –

Rant over

What I can tell you is that the VIX, despite market madness of late, is not deeply overdone just yet. This implies that the noise isn’t over just yet. We may have some more volatility to go before markets begin to trend again. A VIX level that goes above 30 is historically an accurate turnaround signal. It’s in the low to mid 20’s right now. Its getting close to that point of maximum fear, given that the VIX is at the lower band of my “overdone” zones. Meanwhile, ValueTrend  continues to hold about 12% cash in our Equity Platform.


Investing in a blameless world

Going forward, if we trade the wrong way – I don’t think you or I should be held responsible for our own actions. It’s society that is to blame. The government owes us our losses back. It’s only fair.


  • Unfirtunetely the Liberals will retain their power next year. The NDP are leaderless, which does not help the Conservative party. The NDP vote will go to the Libetals. The people of this country have to wake up as we are going down a very dark path.

  • I think I see a pattern to the vix. Two days up, then a few days down. It fools me into thinking “ok this really is the reversal we have been waiting for”, take a position and am wrong (again). In fact whatever I think I should do, the REVERSE is usually true.
    Manipulation? Or me being stupid? False news…..paranoia? But it surely ain”t the govt.

    • No its not the government that throws the VIX around–I think the other commenter was meaning to post his thoughts onto my “FANGs” blog where I made some references to the government.
      Anyhow–the VIX is a very whippy indicator. Its a day by day play by play on what options traders are demanding in premiums. And that up down pattern has always changed by the day–I look for extremes, or clusters around those extremes rather than worrying about the daily whipsaws. So the recent pattern has in fact been for it to remain around 20. My comment was that this is the “entry” point for the capitulation point forming. However, extreme capitulation, thus the most reliable signal, comes in when the VIX momentarily approaches 30 or higher.

    • Yes, and the break of the 200 day. Current support at 2620 is about to be tested–if that breaks, I’d say its almost inevitable that we will see the 2530 Feb. low. To me, that is the single most vital level to hold. If THAT breaks (+ 3 days), I will be selling – I would view that as a sign of worse things to come.

  • One of your replies, the say, “spend Liberally”. Liberals don’t spend anymore. They “invest”.

  • Hey Keith…..I strongly recommend staying away from Politics in your Blog other than in strict context to technical investing. One runs the risk of alienating those of differing views which can often result in unwanted consequences. As has often be quoted in the past…..Politics and Religion are topics best avoided.

    • Thanks James–sometimes I do break out in a mini-rant–and I agree with you I should stay on topic. Unless it directly applies (my blog on the pipelines had direct political considerations for the sector that were appropriate to the topic at hand).
      Having sad that, I always do an off topic rant in the new year and warn readers it has nothing to do with TA (I have covered politics, motivation, driving, all kinds of stuff)
      I will be doing a political one this year–but will provide lots of heads-up for those who don’t like that sort of thing to not bother tuning in on that day
      But to your point–its best to largely stay away for the blogs, and I appreciate the input/reminder.

  • Hello Keith,
    Kindly give me your insights regarding Canada bank in general is that good time to buy,
    Thank you,


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