Volatility: Out for Lunch

The VIXY, VIX is taking a break and along with it the iPath S&P 500 VIX ST Futures ETN (VXX) continues to sink to new lows daily.  The question becomes will the VIX and VXX bounce back?  Should we be afraid or just ignore the warning and buy up everything?

Great 2 second analysis on the state of the VIX comes from Larry Conners at TradingMarkets.com.  Here's what he has to say:

Is The VIX Too Low?
A lot has been written recently about how low the VIX is, how it has to go higher, and therefore the market has to drop. The reality is it’s not true.

If you look at the bull market from 1995-1999, you will see a steady rise in the VIX during that bull market run. Higher long-term VIX levels do not equate to lower stock prices.

Also, as you can see from the statistics below, the VIX has spent over half of its time over the past two decades (from 1992 through Tuesday) between 10-20. So the level it’s at today is very, very normal.

This doesn’t mean the VIX won’t spike from here (it certainly can). What it does mean is that those who are saying the VIX has to rise, or the market has to drop, are simply guessing and not looking at the historical facts.

Bottom line: Enjoy the break in volatility Masters, its time to enjoy the ride.

VXX Charts