At risk of sounding like one of those fringe people claiming Elvis is still alive I boldly proclaim the $VIX is alive and well. He may be small and squirrelly at the moment, but there are subtle signs he may be preparing for battle. Well, seeing him all armored up may be a hint 😉
Fact is the $VIX has been in a dormant phase for much of the QE monstrosity the Fed has been bestowing on the markets. Note the steepest market rallies in the past 2 weeks have coincided with Yellen promising kibbles to her hatchlings forever and yesterday’s Fed minutes proclaiming what everybody can plainly see: Growth is lagging.
So the $VIX hides in the bushes again, but a look closer below the brush and we see an interesting picture emerge. As clients know I have been pointing toward another large spike coming based on the seemingly regular intervals in the chart. Note also that the smaller middle spikes have resulted in a repetitive 4 week period of dread for the $VIX during the last several occurrences. As we are now in week 4 of a similar event one can reasonably ponder if we are not getting ready for another move higher soon:
Note on the chart that the 200 weekly MA has acted as resistance over the past couple of years. This MA is now getting easier to capture and a break above it and the upper descending trend line points to much more agile $VIX in the weeks and months to come.
Note also the bounce of the last couple days has produced a CPC ratio that is back to its lowest point in 3 years indicating maximum investor complacency. Yet, like the $VIX, the chart shows the potential for an enormous shift in the other direction implying that markets are vulnerable here and could experience a sudden shift in risk:
But Yellen’s hatchlings seem unconcerned. It is spring time after all and the mother hen is feeding the young. Nothing to worry about: