The VIX, also known as Wall Street’s fear gauge, jumped 16% on Monday to 15.86, while the S&P 500 Index retreated just 0.3% and is still less than a percent away from its record high.
Citigroup Global Markets Inc. strategists William O’Donnell and Edward Acton saw the action as “very interesting,” noting that the VIX experienced a “bullish hammer reversal pattern against major horizontal support.” In other words, a technical indicator shows the gauge is likely to keep rising.
That happened just after the S&P 500 and VIX, which move in opposite directions about 80% of the time, rose in tandem for two straight weeks for the first time since early May. Back then, an almost 7% slump in the S&P 500 followed in the next month.
We fully expect volatility to rise so enjoy the roller-coaster ride we warned about then and now.
InterAnalyst has been serving over 500,000 investors globally since 1990. Authoring hundreds of financial articles, publications, and almost a million buy and sell trading charts. Mr. Nespoli’s Premier Bull & Bear blog is been read by more than 500,000 investors globally.